Game theory has provided researchers in a variety of fields, from psychology to economics, an opportunity to test human behaviors under controlled conditions. It allows big questions—are humans rational actors when money’s on the line, for example—to be tested in situations where behaviors that deviate from expectations are easy to detect.
The Ultimatum Game is one example of these experiments, and it has been used to show that humans aren’t purely rational when it comes to monetary decisions, as they appear willing to make financial sacrifices in order to punish others in the name of fairness. A paper that will appear at PNAS this week takes things a step further and shows that people will still reject unfair monetary offers, even when the only one they punish is themselves.
The basic rules of the Ultimatum Game are simple. One person is given a stack of cash, and told to divide it between themselves and a second party. That second party is then given the chance to accept or reject the offer; if it’s rejected, neither of them get any money. Clearly, any of this free money should be better than nothing, so under assumptions of strictly rational behavior, you might expect all offers to be accepted.
They’re not. Things in the neighborhood of a 50/50 split are accepted, but as the proportions shift to where the person issuing the ultimatum tries to keep seventy percent of the total, rejections increase. By the time they hit an 80/20 split, nearly 70 percent of the offers are rejected, even though that 20 percent of the total cash would leave the recipient better off than where they started.
The problem with the ultimatum game is that it sets a situation up and then only considers that situation and nothing beyond its immediate context.
While it is rational to take a small offer if you only consider the one game, it may well be rational to refuse it if you expect ever to have dealings with that person again and arguably its rational to take part in a community-wide policy of such behaviour in order to push the behaviour of people as a whole towards more evenly split offers.
It’s not a “strictly rational” approach that says you should always accept – it’s a rational approach that has its context artificially limited to the confines of the experiment.
@Edd
Presumably the people taking part in this are aware that it is a one-off exercise. If so, the results do indicate a lack of rational decision making.
The longer-term ‘community-wide’ rationale that you describe could be the reason why people are prone to reject such unequal offers. It may be that we are ‘hard-wired’ to tend to make such decisions. If this is so then it could be said that our metaphorically ’selfish genes’ are ‘being rational’ by impelling us to behave in this way, but that doesn’t mean that behaving that way in one-off situations is a rational thing to do.
eheheh .. what dum game is that? It’s too simple stated here … if you’d do that in real life these things will happen as well, for many reasons. And not willing to accept unfair offered money .. so from a robbery or when it should have been offered to someone else?? Maybe something like a moral code or some personal principless … all reason enough not to accept money at times, if even you would have wonn by it.
And normally people wont give you something for free, that is, not all people … they at times expect things back … there are strings attached, and not all people like that.
But hey .. if someone wants to give half of his/her fortune away … I’ll be happy to accept .. I wont punish you for doing that …..
And some people really just dont need more money .. prefer to earn or get it in another way …
And about punishment … that would only be the case if there would have been a strong reason for having the need to punish them .. normally I’d find other ways .. thank god I never have to punish people ..
Giant ego’s will have a problem at times accepting as well I guess …
The outcome would be to reject unfair offers and would tend towards 50/50 in a open society situation where these interactions could expect to be repeated, especially if you could choose trading partners.
In a one off theoretical situation as above then the outcome is not that unexpected – the question the subject is being asked is ‘do you mind if someone takes more theoretical money than you’
Put the cash on the table and explicitly tell the participants that they get to take their share of the £100 home with them and the situation would become far more interesting. Would it tend towards big offers so that the chance of acceptance of the offer would rise, or small offers as it’s still something for nothing?
http://www.youtube.com/watch?v=h_2Pwpyye-g
1. I wonder why the article is about the ultimatum game, while the picture depicts the prisoner’s dilemma
2. @edd:
“While it is rational to take a small offer if you only consider the one game, it may well be rational to refuse it if you expect ever to have dealings with that person again”. Yup. But this is not the game. The game is about one iteration only. The point of the one iteration is, imho, to show that people make too many assumptions and therefore do not act rationally. Because in the context of that one game, any decision other than offering a very small amount (sounding smart: A very small epsilon) and, for the recipient, to take even that small amount, is irrational.
Several iterations will change the game, of course. As will other, arbitrarily introduced rules. But that is not the point.
The game pictured above, the prisoner’s dilemma, might be interesting to you, because the solution to the one-iteration-version (always deny if you’re prisoner A) is different from the result of the multiple-iteration-game (where tit-for-tat usually wins)
3. @Mrs G:
“eheheh .. what dum game is that? It’s too simple stated here …”. It is that simple. That is the point of it. There is nothing except these rules. That is what makes it so easy to analyse. All the reasons you quote, from morals to needs, are not part of the game. They are just parts of the rationalisation process (read: making up excuses) for choosing a non-optimal (read: wrong) solution.
@Tierlieb
“The game pictured above, the prisoner’s dilemma, might be interesting to you, because the solution to the one-iteration-version (always deny if you’re prisoner A) is different from the result of the multiple-iteration-game (where tit-for-tat usually wins)”
Yeah I’m familiar with it. I do question what you say about it though.
For one thing, the strategy has to be the same whether you’re A or B so I don’t know why you say “if you’re prisoner A”. For another, the optimal strategy is widely recognised to be both confessing. In that case you’re in an equilibrium where changing to deny leaves you worse off, so in a single iteration you should always confess, not deny. I guess the confusion arises from the slightly non-conventional wording of the PD given at the top.
In the multiple iteration case, the dominant strategy remains ‘always confess’ but in practice ‘tit-for-tat’ does indeed work better – I think its fair to call it a near-optimal solution to the problem in these cases.
this maybe only a marginally different conclusion but I wonder whether the response is also due to wealth feeling relative rather than actual. (And so why consumerism works).
Also worth considering the classic research (which I can remember the exact details of), but basically proved that people need nothing more than the idea there is “another”, to feel hostile towards it.
Min
remember that Richard Pryor/John Candy movie Brewster’s Millions ?
The results of any experiment like this are instantly skewed because the participants know that is a test. It’s simply a thought experiment. Even if the researchers used real money, and promised the participants that they can keep that money, it would unlikely be an amount large enough for them to take it seriously.
Then again, this does happen in real life. How many profitable business deals are thrown out because one party thinks they are being taking advantage of – even if the amount on offer is more than enough to make it worthwhile? It’s the whole notion of “fair”.
@edd:
“For one thing, the strategy has to be the same whether you’re A or B so I don’t know why you say ‘if you’re prisoner A’”.
Of course, you’re right that the strategy has to be the same for A and B. That was just a stupid attempt by me to try make an example, of which I then deleted the lower half (which would have included the same for B). Sorry for the confusion.
“In that case you’re in an equilibrium where changing to deny leaves you worse off, so in a single iteration you should always confess, not deny. I guess the confusion arises from the slightly non-conventional wording of the PD given at the top.”
Yup, the wording got me. Didn’t look closely, it kinda looked like the usual set up, which it isn’t. I think we can both agree that this is the usual treatment is this: http://en.wikipedia.org/wiki/Prisoner%27s_dilemma#Strategy_for_the_classical_prisoner.27s_dilemma
The one above, now that I look closely, is even more weird: The way I read it, using the colour coding, if one player confesses the crime and the other denies it, the one denying gets 10 years, the one confessing gets one?! Better stay with the standard one, that is less confusing…
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[...] Game theory: The Ultimate Game – Why we punish ourselves « Derren Brown Blog The basic rules of the Ultimatum Game are simple. One person is given a stack of cash, and told to divide it between themselves and a second party. That second party is then given the chance to accept or reject the offer; if it’s rejected, neither of them get any money. Clearly, any of this free money should be better than nothing, so under assumptions of strictly rational behavior, you might expect all offers to be accepted. [...]