Games and Economic Behavior 63 (2008) 292–307 www.elsevier.com/locate/geb Subgame perfection in ultimatum bargaining trees Dale O. Stahl a,∗ , Ernan Haruvy b a Department of Economics, University of Texas at Austin, Austin, TX 78712, USA b School of Management, University of Texas at Dallas, Richardson, TX 75083, USA Received 23 January 2006 Available online 13 November 2007 Abstract In typical experiments on ultimatum bargaining, the game is described verbally and the majority of sub- jects deviate from subgame-perfect behavior. Proposers typically offer significantly more than the minimum possible and Responders reject “unfair” offers. In this work, we show that when the ultimatum bargaining game is presented as an abstract game tree, the vast majority of behavior is consistent with individualis- tic preferences and subgame-perfection. This finding raises doubts about theories that ignore the potential influence of social context and experiments that do not control for social context.  2007 Elsevier Inc. All rights reserved. JEL classification: A13; B49; C72; C91 1. Introduction In ultimatum bargaining, one party (the Proposer) makes an offer to another party (the Respon- der), who can accept or reject the offer. If accepted, the parties split a pie according to the agreed terms; otherwise, neither party gets anything. The subgame perfect solution is for the Proposer to offer the minimum feasible amount to the Responder, and for the Responder to accept all positive offers. However, in laboratory experiments most Proposers offer close to an equal split, and most Responders reject offers of less than 30%. See Guth et al. (1982) for the original experiment, and Thaler (1988) and Roth (1995) for an overview of ultimatum game experiments. 1 * Corresponding author. E-mail address: stahl@eco.utexas.edu (D.O. Stahl). 1 Experiments with sequential bargaining, such as Rapoport et al. (1995) and Zwick and Chen (1999), find similar results—subjects behave in a manner consistent with a taste for fairness. 0899-8256/$ – see front matter  2007 Elsevier Inc. All rights reserved. doi:10.1016/j.geb.2007.08.003