You and one other person, who you haven’t met before and will probably never meet again, have volunteered for a scientific experiment. As it turns out, the experiment is quite simple: the experimenter offers $1000 to be divided between the two of you. However, there are strict rules for how to divide the money.
The other person is given all of the money first. He or she can then offer you a portion of it, any amount from $1 to $999. At that point you can either accept or decline; you are not allowed to negotiate with the other person in any way. If you decline, the $1000 goes back to the experimenter and neither of you gets anything.
The question: what is the minimum amount of money which the other person needs to offer you, because you will invoke your veto power if it’s less than that?
Once the offer is on the table I will accept any 3-digit amount. Anything less than that is a flat out insult and it will be worth the paltry sacrifice just to rub it in his face later.
If I understand the scenario correctly, it costs me nothing to be part of this experiment, so at the worst I walk away a dollar richer than I started.
I don’t really understand why anyone would refuse any amount in this scenario, unless it was to punish the other player for being a cheapskate. But since it’s not my money we’re playing with, it doesn’t matter to me if the other guy makes out better than I do.
ETA:
It appears I’m in the minority here…am I misunderstanding the scenario, or do I just not care so much about being ‘dissed’?
If rent is due and I’m a little short I’d accept anything I’m sure, but if I was set for money (bills are being paid on time, regular income) I wouldn’t take less than $500.
Hmm yeah, you’re probably right. The other poll had only five options so I figured I was being quite detailed already. But I just realised that people whose minimum amount is somewhere in the $2 - $199 range, don’t really have an option to choose. Unfortunately I can’t add new poll options anymore…
How is it an insult? Neither you nor the other participant are doing anything particularly onerous - assuming the commute to the lab isn’t crazy. (Hell, it could even be done online, via IM and paypal).
Any payout leaves me better off that I would be without it. Heck, even if the commute to the lab is onerous, I’m personally better off with a $1 payout than with no payout at all. The only rational response is to accept whatever payout is offered.
On the other hand, if I’m the one that’s giving the payout, I’d want to give up an even $500. That’ll seem “fair” to most people, and maximize my chances of getting a (fairly large) payout for myself.
It’s insulting because I, as the co-recipient of this money, has been given a certain amount of leverage in this deal. When person 1 goes ahead and says “I pick the amount and I say you’ll have to suck it up and settle for $20”, that’s insulting to me. I have the power to take away his share of the money, and he needs to respect that. If he doesn’t he shouldn’t be surprised if I decide to use that power to return the favor. A little courtesy, that’s all I ask.
It’s not rational from a purely game theory standpoint. But people aren’t purely rational actors, and it’s worth a pithy amount of money to me to rub his face in his own avarice.
$1 and up? Hell, I’d accept anything $0 and up. For some reason, other posters think they have some sort of claim to the money. I see no reason why it matters how much the experimenters gave the other guy. It doesn’t matter if they gave him $10 or $1,00,000,000. Why would I refuse perfectly good money? You’re just jealous that he got the priviledged position instead of you.
Where is the sense of entitlement coming from? You don’t “deserve” half the money. Granted, the offeror doesn’t “deserve” any given amount either, but once the offer is made, what does it gain you to act irrationally? I mean, really…some of you would actually turn down a $499 offer?
Who lied and told you you’re corecipient? You’re not. None of that money is yours until he decides to give you some and you decide to take it. It’s 100% his money.
Just out of curiosity, Chessic Sense: would your answer have been different if I had phrased it slightly differently? E.g. “The first player gets to propose how the experimenter will divide the money between the two of you. The second player then gets to accept or decline that proposal.”
Well, technically it’s the experimenters’ money, and they’ve delegated to the first player the task of disbursing it (or not, if his offer isn’t accepted). But I agree with your position.
100% his money? Really? Are you sure? Then why is the person conducting the experiment already reaching over to take the money back? I guess I must have accidentally hit the veto button. Oops. Well it WAS 100% his money, for a few seconds there.
No. It’s the equivalent. The first guy has some money and the second guy gets a veto power. It’s the first guy’s job to “purchase” the veto power. Player two’s job is to either exercise the power or to sell it. That’s the deal. This idea of the second player having some claim to a piece of the money is crap. He was given power, not money.
He’s welcome to demand anything he wants for the power. That’s true. It could be 1%, it could be 99%. But most people don’t pick 50%. That’s a nice-looking number, sure, but it’s nonsensical. There’s no logic that forces the Power guy to demand 50%, as there’s no pressure on him to come out even on the deal.
This experiment is no different than the sale of any other service. Let’s say I get $2,000 in my paycheck. Does it matter to a service business how much I make? Does the accountant demand half my check for his services, just so he comes out even with me? No. So why should it matter to Power player?
In practice, it doesn’t. Most people set the price of their power at 35%-40%, as (so far) is being demonstrated in this poll.