In: Economics
What are three possible reasons why the experimental results from the Dictator Game do not match the game theoretical equilibrium for the game?
Question:
What are three possible reasons why the experimental results from the Dictator Game do not match the game theoretical equilibrium for the game?
Dictator Game:
The dictator game is a popular experimental instrument in social psychology and economics, a derivative of the ultimatum game. The term 'game' is a misnomer because it captures a decision by a single player: to send money to another or not. The results – most players choose to send money – evidence the role of fairness and norms in economic behavior, and undermine the assumption of narrow self-interest.
Equilibrium or Ultimatum Game:
The ultimatum game is a game that has become a popular instrument of economic experiments. It was first described by Werner Güth, Rolf Schmittberger, and Bernd Schwarze. One player, the proposer, is endowed with a sum of money. The proposer is tasked with splitting it with another player, the responder. Once the proposer communicates their decision, the responder may accept it or reject it. If the responder accepts, the money is split per the proposal; if the responder rejects, both players receive nothing. Both players know in advance the consequences of the responder accepting or rejecting the offers.
Differences:
Different from the dictator game, in a standard ultimatum game, the proposer makes an offer regarding how to split an amount of resource with the responder, who can accept or reject this offer. If this offer is accepted, then the resource is split as proposed. If this offer is rejected, then both earn nothing. Thus, the UG proposers’ behaviors may be motivated by fear of rejection of unfair offers, apart from the preference for fairness that exists in the dictator game. The strategic considerations due to fear of rejection in the ultimatum game may elicit more cooperation than the dictator game. Indeed, previous research has consistently found higher proportion of resources offered to the partner in the ultimatum game, compared to the dictator game. Thus, we predict that people would be more cooperative in an ultimatum game than in a dictator game.