Ultimatum and dictator games

ULTIMATUM AND DICTATOR GAMES 1

Ultimatumand dictator games

Ultimatum Game

Dictator Game

Offer

# of offers Made

# of offers Accepted

% Accepted

Proposers Earned

Offer

#of offers

Made

$1

0

5

14

$1.26

$0

2

$2

3

0

0

$0

$1

6

$3

5

3

9

$0.63

$2

10

$4

9

15

43

$2.58

$3

7

$5

15

12

34

$1.70

$4

6

$6

2

0

0

$0

$5

4

$7

0

0

0

$0

$6

0

$8

1

0

0

$0

$7

0

$9

0

0

0

$0

$8

0

$10

0

0

0

$0

$9

0

&nbsp

$10

0

Inthe Ultimatum Game, which offers were usually accepted and which wereusually rejected? Discuss:

  • Offers for $4 were often accepted. 43% take this. The second offer that was often accepted is that of $5. 34% of the participants consider this.

  • Offers for $2, $6, $7, $8, $9, $10 were usually rejected. They were accepted by 0 participants

Peopleare inclined to offer fair splits. It is an exception to theassumption that an individual will be rational, will maximize utilityand will make the decision individually. The results show that aperson does not just work toward maximization of expectedsatisfaction. It is likely that the responder uses his/her power toaccept or reject the offer as leverage motivating the person makingthe offer to act in a fair manner.

Rejectionof proposals that are unfair to teach the person proposing a lessonis called altruistic punishment. At the point where the offer valueswere much closer to being fair ($4 &amp $5), the percentage acceptedis higher as compared to other offer values. The person proposingbecome averse to inequality out of fear of losing out on the proposedamount he/she gets if the responder decline the proposal.

Inthe Ultimatum Game, (a) which offers were most common? (b) Whichproduced the highest earnings? (c) Do the two coincide? Discuss

a)The most common offer is $5 made 15 times followed by an offer of $4made 12times

b)The highest earning was produced by an offer of $4. It earned $2.58followed by an offer of $5 which earned $1.70

Theycoincide in that the common proposed values are also the offer valuesthat produce the highest earnings. The two offers, $4 and $5, lie atthe half way mark giving close to fair rewards for both participantsof the game. These offers present equality for both the personproposing and accepting. Again we see the person making the offerforgoing an opportunity to increases own satisfaction. It is becausethey know that the responder will not go for a small, inequitable,offer knowing well that the proposer will get more reward from theoffer.

Itis also worth noting that after the central offer values of $4 and$5, the person making the offers become selfish and opts not topropose a higher reward now that his reward will be smaller than whatthe responder gets. It explains the drop in the number of offers asevident in the graph of the number of offers against the offers made.

Inthe Dictator Game, which values were made most often? Discuss

  • The offer made most often was $2. With ten proposals of this value made.

Withthe dictator games, we experience inequity. The recipient plays apassive role and has no say in the outcome. The dictator game isreferred to as a degenerate game because of this. The dictator is outto maximize own satisfaction, makes a rational decision at anindividual level. As such most offers are of lower value. With anincrease in offer value, from $2, the dictator reduces the number ofproposals made since the satisfaction obtained by him/her, by gaininga greater reward, reduces. It explains the slope in the graph for thenumber of offers. At a value of $6 he/she stops making offers.

Thedictator game does not urge the person making the proposal tomaximize the responder’s benefits. It is because there is noaltruistic punishment. The proposer will refrain from making offersas the value of the offer increases explaining the drop, in offersmade, as seen in the graph after the offer value of $2. Finally, theywill totally shy off resulting in the consistent 0 number ofproposals made from the proposal value of $6 to $10.

Thetwo games give evidence to dispute the theory that an individual isalways rational and puts his/her self-interest first. This experimenttests the theory of mind. It looks at how we judge other people’smental state and how to predict other people’s action. The proposalmaker without knowing is forced to predict the responder’sinterpretation of offers before making them so as to guarantee thatthe proposals are accepted. The responder, on the other hand,leverages the situation to his advantage through altruisticpunishment and other tactics. Cooperation often entails short-termcosts for some participants in exchanges. For this reason,cooperation is not inevitable free riding and other selfishbehaviors is common (Chibnik, 2011).&nbsp

References

Chibnik,M. (2011).&nbspAnthropology,economics, and choice.Austin: University of Texas Press.