Axiomatic Bargaining with Inequality Aversion: Norms vs. Preferences ∗

This paper argues that social norms might play a role in bargaining situations in-cluding the ultimatum game and asks two questions. First, if social norms govern be-havior instead of the standard non-cooperative equilibria, do other-regarding attitudes still impart bargaining power? Second, can one still infer differences in other-regarding preferences from differences in ultimatum game offers? To capture social norms we re-place the standard non-cooperative game-theoretic solution techniques with axiomatic (or cooperative) bargaining solutions, specifically the Nash and Kalai-Smorodinsky so-lutions. If the Nash axioms govern the social norm then the two questions above receive affirmative answers only when the disagreement point is sufficiently asymmetric. When the Kalai-Smorodinsky axioms govern the social norm then the two questions receive partial affirmative answers: increased aversion to being behind strengthens bargaining power and can be deduced from choice differences in the laboratory, but increased aver-sion to being ahead has an ambiguous impact and therefore cannot be inferred from laboratory behavior. We conclude that using axioms to identify social norms separate from participant preferences proves to be a promising line of research, and that they have important implications for how experimental economists interpret their results