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It's called the ultimatum game.

One person offers a share of a known quantity, say, $100, to a second.  The second person knows that they can accept or reject the offer.  If player 2 accepts, both receive the reward in the agreed proportion.  If the second player rejects the offer, both receive nothing.

Just because I know you love graphs...

From Gamelab, Harvard:

Number of players: 30 (15 games)
Mean proposal: 39 ± 10.7
Distribution of proposals:

Notes
The vast majority (73%) offers 40 or 50 points.
Surprisingly one offer of 40 is rejected
Comments
The rational strategy is to offer 1 point, and to accept everything. In reality, offers below 30% get mostly rejected. In a vast majority of studies conducted with different incentives in different countries, some 60-80% of proposers offer between 40% and 50% of the total sum, and only 3% of proposers offer less than 20%. Conversely, some 50% of responders reject offers below 30% of the total.

The 'rational',  material, utility-maximising response for the proposee is to accept anything offered, even one unit out of 100.

People don't.  There appears to be a payoff in depriving the maker of an unfair offer of his/her share, even at cost to oneself.

by Sassafras on Wed Jul 18th, 2007 at 03:14:56 PM EST
[ Parent ]
How do the "rational" strategies change when the game is played repeatedly and the players know that they will face off again?

Can the last politician to go out the revolving door please turn the lights off?
by Migeru (migeru at eurotrib dot com) on Wed Jul 18th, 2007 at 06:07:35 PM EST
[ Parent ]
by Sassafras on Wed Jul 18th, 2007 at 06:47:06 PM EST
[ Parent ]
Well, yes, that's exactly why I'm asking. The optimal strategy in the iterated prisoner's dilemma is suspected to be tit for tat. Applying tit for tat to the ultimatum game, if player 1 says "fuck you" to player 2 ("I give you 1 unit, take it or leave it") player 2 feels betrayed and so decides to betray back (tit for tat: "fuck you back, I won't take my 1 so you lose 99").

So I suspect the experimental result is consistent with people playing as if they were playing an iterated version of the ultimatum game, even if they are aware the rules say the game is a one-off thing.

Can the last politician to go out the revolving door please turn the lights off?

by Migeru (migeru at eurotrib dot com) on Wed Jul 18th, 2007 at 06:53:28 PM EST
[ Parent ]

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