and then quickly come to the same solution to offer nearly all of the tokens to the responders. For example, in Japan case, market outcome changed significantly from about 40% proposers offered lower than 800 tokens in round 1 to nearly 5% who offered that amount in round 10. The same situation can also be observed in Yugoslavia, Israel and US. In other words, the empirical results are quite consistent with the data from the standard ultimatum game.
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The ultimatum game issue didn’t stop here as our economists wanted to study more about the effect of competition on social preferences. Fischbacher et al. (2009) introduced three treatments to the participants to assess the impacts of competitions on the responders’ side. The first treatment was similar to the standard two-player ultimatum game (BG). The second treatment (RC2) added one more responder into the game and the number of responders in the third treatment (RC5) is five. In these treatments, the structure of the game are quite similar to the standard ultimatum game except that there is more than one responders in RC2 and RC5. Now, the proposers were asked to divide their 100 units of money to the responders and the responders have to make the decisions without knowing the choices of others. In the event that all responders reject, all participants earn zero. The prediction about the outcome of these treatments with purely selfish preferences is straightforward and all responders are expected to accept any offer with a positive amount. Once again, there would be a subgame perfect equilibrium outcome when the proposer offer zero and that is still accepted by at least one responder. In the end, the game progressed in the same way as it did in 1982 in Guth’s experiment. Figure 2 will provide us a glimpse over the results of all three treatments.
Figure 2: Game with responders’ competition
(Source: Fishbacher et al, 2009:535)
We can see that the acceptance thresholds of responders keeps decreasing further and further as the game progress. As we introduce more responders into the game, they will be more resisted to reject the offers which used to be low with the fear that other responders will take it. In the graph, the average accepted offers in RC2 and RC5 are quite similar but if we compare to the situation in BG, there would be a huge difference. To summarize, both the introduction of the competition and the increase in responder reduced the accepted amount considerably.
In a nutshell, from the ultimatum game, fairness concerns play a big role in our process of decision making. In the standard ultimatum game, some are willing to give up some kind of profit when they feel that they are being treated unfairly. However, it is ambiguous to define that feeling of “unfairness”. In some circumstances, to be fair or unfair is related to the relative payoffs, when the responders did not hesitate to turn down the low offers in the standard ultimatum games. In other cases, the social norms “fairness”, like other non-monetary concerns, is completely dominated by the competition effects. Like in the games with proposers and responders’ competition, when participants know that the inequality outcomes are unavoidable, they try their best to turn that equality into advantage and to increase their monetary payoffs as much as possible. At the end of the day, competition force people to be selfish.
- Smith, 1759: ‘The Theory of Moral Sentiments’
- Chaudhuri, A. (2008) ‘Experiments in economics: playing fair with money’. New York: Routledge
- Drouvelis, M. (2013) ‘Application of prospect theory and social preferences’.
- Roth, A.E., Prasnikar, V., Fujiwara, M.O & Zamir, S. (1991), ‘Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh and Tokyo: An Experimental Study’ The American Economic Review 81 (5) 1068-1095
- Fischbacher, U., Fong, C.M. & Fehr, E. (2009) ‘