Ultimatum game
The first experimental analysis of the ultimatum game was by Werner Güth, Rolf Schmittberger, and Bernd Schwarze:[4] Their experiments were widely imitated in a variety of settings.
[14] Proposers and responders from WEIRD (Western, educated, industrialized, rich, democratic) societies are most likely to settle on equal splits.
[22] The classical explanation of the ultimatum game as a well-formed experiment approximating general behaviour often leads to a conclusion that the rational behavior in assumption is accurate to a degree, but must encompass additional vectors of decision making.
[23] Behavioral economic and psychological accounts suggest that second players who reject offers less than 50% of the amount at stake do so for one of two reasons.
By contrast, a self-control account suggests that rejections constitute a failure to inhibit a desire to punish the first player for making an unfair offer.
[26] Similar results from other small-scale societies players have led some researchers to conclude that "reputation" is seen as more important than any economic reward.
[28][29] Another way of integrating the conclusion with utility maximization is some form of inequity aversion model (preference for fairness).
Even in anonymous one-shot settings, the economic-theory suggested outcome of minimum money transfer and acceptance is rejected by over 80% of the players.
[citation needed] However, this explanation (bounded rationality) is less commonly offered now, in light of subsequent empirical evidence.
[31] It has been hypothesized (e.g. by James Surowiecki) that very unequal allocations are rejected only because the absolute amount of the offer is low.
Essentially, this explanation says that the absolute amount of the endowment is not significant enough to produce strategically optimal behaviour.
However, many experiments have been performed where the amount offered was substantial: studies by Cameron and Hoffman et al. have found that higher stakes cause offers to approach closer to an even split, even in a US$100 game played in Indonesia, where average per-capita income is much lower than in the United States.
[33] It is worth noting that the instructions offered to proposers in this study explicitly state, "if the responder's goal is to earn as much money as possible from the experiment, they should accept any offer that gives them positive earnings, no matter how low," thus framing the game in purely monetary terms.
Zak, Stanton & Ahmadi (2007) showed that two factors can explain generous offers: empathy and perspective taking.
Oxytocin did not affect the minimum acceptance threshold or offers in the dictator game (meant to measure altruism).
[39] This was suggested to be due to the abstractness and delay of the reward, rather than an increased emotional response to the unfairness of the offer.
[41][42][43][44][45] Simple evolutionary models, e.g. the replicator dynamics, cannot account for the evolution of fair proposals or for rejections.
The extent to which people are willing to tolerate different distributions of the reward from "cooperative" ventures results in inequality that is, measurably, exponential across the strata of management within large corporations.
An early description of the ultimatum game is by Nobel laureate John Harsanyi in 1961, who footnotes Thomas Schelling's 1960 book, The Strategy of Conflict on its solution by dominance methods.
Harsanyi says,[47] Josh Clark attributes modern interest in the game to Ariel Rubinstein,[48] but the best-known article is the 1982 experimental analysis of Güth, Schmittberger, and Schwarze.
[49] Results from testing the ultimatum game challenged the traditional economic principle that consumers are rational and utility-maximising.
[51] Since the ultimatum game's development, it has become a popular economic experiment, and was said to be "quickly catching up with the Prisoner's Dilemma as a prime showpiece of apparently irrational behavior" in a paper by Martin Nowak, Karen M. Page, and Karl Sigmund.
