What limits escalation?—Varying threat power in an ultimatum experiment

Threat power is the ability to impose a great loss on someone else at relatively low own cost and can be measured by the ratio of other’s and own loss. It can be varied by assuming that rejecting an ultimatum reduces the payoff of the proposer to its λ-share and that of the responder to its (1−λ)-share where 0≤λ≤1. Results demonstrate that proposers become more greedy when λ is high, whereas responders adjust to threat power, but punish greed to a high extent irrespective of own rejection cost.