This came up in an article I was reading yesterday. It might not work as a poll online, but I kind of liked it.
Let’s say you’re sitting on a park bench next to a stranger. Another guy comes up and says, “I’m going to offer you guys $10. Stranger gets to decide how to split it. You (doper) gets to say ‘yes’ or ‘no’ to the deal.”
If you say “no”, the offerer keeps his $10 and walks off.
So, the stranger on the bench next to you says, “All right. I’ll take $9. Give him $1.”
What’s your immediate reaction to that? ‘Yes’ or ‘no’.
If ‘no’, then how much would he have to offer for you to take it?
“Yes” is the answer under any circumstances. Any way you cut it, it does me no harm. The stranger gets something, and I might get something, and it costs neither of us a thing. Why would I ever say “no”?
According to the Wikipedia page on the Ultimatum Game (which this is), offers of less than 20% are often rejected.
I can see rejecting the offer in certain cases. I wouldn’t reject the $9/$1 split since both of our “winnings” are relatively low, but if the stranger offered us $1000 and the other player gave me $1, I would reject. Offering me such a small amount of money compared to the main prize would be a selfish thing to do, and I would choose to punish his selfishness by depriving him of his $999. Petty maybe, but the way I see it my glee at punishing the other person for being selfish is worth a buck.
If it were costing me something for the other person to get the $999, then I would definitely say no just to piss him off. But at zero cost to myself? I’ll take the karma points and buy a Scratch Ticket with the $1.
I think the more interesting question would be guy comes up and says, “I’m going to offer you guys X$. You get to decide how to split it. The stranger gets to say ‘yes’ or ‘no’ to the deal.”
How much do you offer to give the stranger?
Probably depends on the dollar amount. If it’s a significant amount do you risk offering anything other than a 50/50 split?
Committing to behaving “rationally” is a signal that you can be exploited. Not knowing who’s watching or whether there will be repeated interaction with this person, someone who recognises his less than perfect ability to fully understand the circumstances in which he finds himself might follow a code of refusing “unfair” offers. Whether that is a norm or an evolved characteristic is hard to say. But in a strategic world of costly information, someone who tries to be homo economicus is a ripe sucker.
As for me, it depends what the stranger looks like. If he looks like he’s struggling, I’d accept a dollar. If he looks like he’s doing ok, give me 5 or I’ll pass. If he looks rich and smug, I’d look at him in a way that told him he’d better give me most of the money - and mean it.
So it’s all how they ‘look’ to you? I wouldn’t choose based on appearance alone - that’s too easily faked.
It’s no skin off my back; I’d take any amount. Be it $1 or $999 - I’m nothinking about the other person at all.
If the situation were reversed, I’d take $9 (or $999) and give the stranger $1. We’re both getting something, even if I get more. Luck of the draw…
I’ve been thinking about how my answer varies with the total amount of money, and it’s really interesting.
At $10, I’d take whatever was offered ($1 or greater. I don’t need change), since it’s just not enough money to care about. At $100, I don’t think I’d accept $10. With the other guy standing to lose $90, I’d want to punish him for his greed. At $1000 and up, I’d start to accept a much smaller percentage. By $1 million, I’d happily accept $500, only 0.05%, because the value of $500 is worth much more to me than the value of punishing the other guy.
I’d probably immediately turn to the stranger next to me on the bench and say, “Unless you give me half, I’ll say ‘no.’” And look and sound like I mean it.
If the original amount was anything less than $1,000 and the percentage was anything less than 20%, I’d refuse the deal just to punish the other guy for being a dick. Above 1K, and even 20% starts sounding like real money, so I’d have to think about it. Depends on how vengeful I’m feeling that day. Curiously, the less I need the money, the more likely I am to refuse the offer if I feel it’s unfair.
It’s a norm. Several studies have been done in different cultures and the less market integration, the less even the offers and the more disparity accepted. But I strongly disagree that it suggests irrationality, especially because rationality cannot be inferred from a single choice. Perhaps more importantly, having a preference for being treated fairly means a willingness to give up something for it. So, would I pay $1 in order to not be treated unfairly? Yeah, I might do that indeed. There’s nothing irrational about that, just as there’s nothing irrational like paying someone to do one’s own taxes, since simplicity & reduced hassle are worth paying some money for.
I would be inlined to reject anything less than a 50/50 split. I’m well enough off to be able to reject any amount of money to punish someone who is being greedy. In any case, even if I’m losing (say) $100 out of $1,000, they are going to be losing $900 – and they will know it was because they were too greedy, while I will know it is from a well developed sense of rightness.
Interesting question. My initial reaction would be to decline an ‘unfair’ offer in order to punish the greedy stranger. However, one thing that I would consider in that situation is whether the ‘stranger’ might actually be an associate of the ‘researcher’ and be part of the test. In that case, ‘punishing’ them would not actually have any effect, other than to deprive me of the money.
It’s like Mutual Assured Destruction. If the stranger believes you will refuse a low percentage, even though you both would lose, he’ll have to offer you a higher percentage. By threatening to accept a loss, you can increase your gain.
I don’t think we really disagree. I had thought we might have this sort of discussion in your thread of a while back, but it obviously dropped off the page.
In a strategic world where information is costly to acquire and process it may well make sense to act like this. Indeed, people who act according to the precepts of narrow rationality may well be mentally defective - as suggested by my bumping link. But I’m not sure it’s like hiring agent to do your taxes. Granted, you have to trust your agent, but other than that it’s just using the market in order to specialise. Here, you’re doing something really associated with non-rational behviour: leaving money on the table.
I dunno about treating this as a preference. Or at least, I don’t think this fits into standard consumer theory. That’s all about outcomes, about states of the world. Process values don’t fit easily into that framework. A fully rational perfect altruist - that is, an agent whose own welfare entered into his utility finction with no greater weight than anyone else’s - would take any one-time offer.
As for whether this is a norm or an evolved characteristic, I suspect it’s a mixture. I’m pretty confident that there’s an innate (no doubt highly biased) tendency for people to do things to appear difficult to exploit. And equally, I’m confident that how this is expressed in different cultures depends on the historically produced informal institutional environment. In backward societies it winds up in cycles of revenge. In advanced ones, confidence that one will not be exploited in everyday transactions because most actors are expected to have committed themselves to what Little Nemo calls Mutually Assured Destruction hugely lowers the costs of using the market.
Yeah, I tend to get distracted. Do you have the Akerlof article & the Heiner article? I’ve no access to anything academic, so what I find is generally pure luck if there’s more than an abstract available. If you can email them to me, that’d be totally cool.
On the basis of how people are emotionally harmed by unfair treatment, it seems unlikely to me that it’s not a preference; the preference for not being exploited is implied by it leading to cycles of revenge in backward societies. My job as zoning administrator (dealing with land-use laws) for a township exposes me to the preference for fairness quite frequently: even when people have nothing to gain, they still perceive great harm being done when somebody else gets something they were previously denied, and if they could pay $1 to get what they think is fair treatment, I’m sure many of them would.
If the ultimatum game was for $1,000 and I were only offered $100, then I would most likely take the money, because a $100 windfall outweighs the sense of unfairness that’d bother me. Simarly, the people in my township probably wouldn’t spend $100 just to get what they think is fair. (Although, in terms of time and energy, many sacrifice resources well beyond that to get what they consider to be a fair outcome—often for for somebody else!)
To put all that another way, I suspect that my notion of strictly rational includes something like fairness or the desire to avoid exploitation, and that these are goods indeed. Just as risk (insurance companies buy it; casinos sell it) and simplicity (accountants, online tax filing, automatic transmissions, and spell checkers) are goods, so to do I consider fairness to be a good.
But by being perfectly rational, you lower the amount of money you receive. An irrational person who’s willing to refuse a minimal offer and get nothing, will end up being offered more. As Mr Spock once said, “sometimes being illogical is the most logical choice.”
