Ultimatum Game

The Ultimatum Game (Güth et al., 1982) is a one-shot bargaining game. A first player (the Proposer) offers a fraction of a money amount; the second player (the Responder) may either accept or reject the proposal. If the Responder accepts, she keeps the offered amount while the Proposer keeps the difference. If she rejects it, both players get nothing. According to traditional Game Theory, the optimal choice is the following set of strategies:

• The Proposer should offer the smallest possible amount (in order to keep as much money as possible)
• The Responder should accept any amount (because a small amount should be better than nothing)

The UG has been experimentally tested in a variety of contexts, where different parameters of the game where modified: age, sex, the amount of money, the degree of anonymity, the length of the game, etc. (Camerer & Thaler, 1995; Henrich et al., 2004; Oosterbeek et al., 2004; Samuelson, 2005). The results show a robust tendency: the game-theoretic strategy is almost never followed. People tend to anticipate and make “fair” offers. While Proposers offer about 50% of the "pie", Responders tend to accept these offers while rejecting most of the “unfair” offers (less than 20% of M). Some will even reject “too fair” offers (Bahry & Wilson, 2006).

Henrich et al (2005) studied Ultimatum behavior in 15 different small-scale societies. They found cultural variation, but these variations exhibit a constant pattern of reciprocity: differences are greater between groups than between individuals in the same group. Subjects are closer to equilibrium strategies in 4 situations: when playing against a computer, (Blount, 1995; Rilling et al., 2004; Sanfey et al., 2003; van 't Wout et al., 2006) when players are groups (Robert & Carnevale, 1997), autists (Hill & Sally, 2002) or people trained in decision and game theory, like economists and economics students (Carter & Irons, 1991; Frank et al., 1993; Kahneman et al., 1986).

Brain scans of people playing the ultimatum game indicate that unfair offers trigger, in the responders’ brain, a ‘moral disgust’: the anterior insula (associated with negative emotional states like disgust or anger) is more active when unfair offers are proposed (Sanfey et al.). Subjects experience this affective reaction to unfairness only when the proposer is a human being: the activation is significantly lower when the proposer is a computer. Moreover, the anterior insula activation is proportional to the degree of unfairness and correlated with the decision to reject unfair offers (Sanfey et al. 1756). Beside the anterior insula, two other areas are recruited in ultimatum decisions: the dorsolateral prefrontal cortex (hereafter DLPFC), involved in cognitive control and goal maintenance, and the anterior cingulate cortex ,involved in cognitive conflict and emotional modulation. Thus, when an offer is fair, it seems normal to accept it: there is a monetary gain and no aversive feelings. When the offer is unfair, however, the brain faces a dilemma: punish the unfair proposer, or get a little money? The final decision depends on whether the DLPFC or the anterior insula ‘wins’: Sanfey and his colleagues found that the anterior insula is more active in rejections, while the DLPFC is more active in acceptations. The ACC, also more active when offers are unfair, behave as a moderator between the cognitive goal (more money) and the emotional goal (punishing). Thus deciding to accept or reject an offer in the ultimatum game is a complex adjustment between multiple goals and values.

A recent study by Wallace, Cesarini, Lichtenstein & Johannesson now investigate the influence of genes on ultimatum behavior. The compared monozigotic (same set of genes) and dizigotic ("non-identical") twins. Their statistical analysis identified which of these different factors explains the variation in behavior: genetic effects, common environmental effects, and nonshared environmental effects. They found that genetics account for 42% of the variation in responder behavior: i.e., identical twins are more likely to behave similarly in their reaction to Ultimatum proposition. Thus, sensibility to fairness might have a genetic component

See also:

• Folk-psychology and Emotions
• Game theory and social cognition
• Morality and folk psychology

References

• Bahry, D. L., & Wilson, R. K. (2006). Confusion or Fairness in the Field? Rejections in the Ultimatum Game under the Strategy Method. Journal of Economic Behavior & Organization, 60(1), 37-54.
• Blount, S. (1995). When Social Outcomes Aren't Fair: The Effect of Causal Attributions on Preferences. Organizational Behavior and Human Decision Processes, 63(2), 131-144.
• Camerer, C., & Thaler, R. H. (1995). Anomalies: Ultimatums, Dictators and Manners. The Journal of Economic Perspectives, 9(2), 209-219.
• Carter, J. R., & Irons, M. D. (1991). Are Economists Different, and If So, Why? The Journal of Economic Perspectives, 5(2), 171-177.
• Frank, R. H., Gilovich, T., & Regan, D. T. (1993). Does Studying Economics Inhibit Cooperation? The Journal of Economic Perspectives, 7(2), 159-171.
• Güth, W., Schmittberger, R., & Schwarze, B. (1982). An Experimental Analysis of Ultimatum Bargaining. Journal of Economic Behavior and Organization, 3(4), 367-388.
• Henrich, J., Boyd, R., Bowles, S., Camerer, C., E., F., & Gintis, H. (2004). Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies: Oxford University Press.
• Henrich, J., Boyd, R., Bowles, S., Camerer, C., Fehr, E., Gintis, H., McElreath, R., Alvard, M., Barr, A., Ensminger, J., Henrich, N. S., Hill, K., Gil-White, F., Gurven, M., Marlowe, F. W., Patton, J. Q., & Tracer, D. (2005). "Economic Man" In Cross-Cultural Perspective: Behavioral Experiments in 15 Small-Scale Societies. Behavioral and Brain Sciences, 28(6), 795-815; discussion 815-755.
• Hill, E., & Sally, D. (2002). Dilemmas and Bargains: Theory of Mind, Cooperation and Fairness. working paper, University College, London.
• Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1986). Fairness and the Assumptions of Economics. The Journal of Business, 59(4), S285-S300.
• Oosterbeek, H., S., R., & van de Kuilen, G. (2004). Differences in Ultimatum Game Experiments: Evidence from a Meta-Analysis. Experimental Economics 7, 171-188.
• Rilling, J. K., Sanfey, A. G., Aronson, J. A., Nystrom, L. E., & Cohen, J. D. (2004). The Neural Correlates of Theory of Mind within Interpersonal Interactions. Neuroimage, 22(4), 1694-1703.
• Robert, C., & Carnevale, P. J. (1997). Group Choice in Ultimatum Bargaining. Organizational Behavior and Human Decision Processes, 72(2), 256-279.
• Samuelson, L. (2005). Economic Theory and Experimental Economics. Journal of Economic Literature, 43, 65-107.
• Sanfey, A. G., Rilling, J. K., Aronson, J. A., Nystrom, L. E., & Cohen, J. D. (2003). The Neural Basis of Economic Decision-Making in the Ultimatum Game. Science, 300(5626), 1755-1758.
• van 't Wout, M., Kahn, R. S., Sanfey, A. G., & Aleman, A. (2006). Affective State and Decision-Making in the Ultimatum Game. Exp Brain Res, 169(4), 564-568.
• Wallace, B., Cesarini, D., Lichtenstein, P., & Johannesson, M. (2007). Heritability of ultimatum game responder behavior. Proceedings of the National Academy of Sciences, 0706642104.

- Benoit Hardy-Vallee, University of Toronto