The Ultimatum And Dictator Games

Our True Colours

We often learn about our true natures and that of others when we play games. 

For example, in the 1986 Football World Cup quarter-final when Argentina played England, Diego Maradona hit the ball with his hand before it went into the England goal. This was a clear foul, but the referee did not see it, and Maradona did not own up to this. The goal was accepted, and Argentina went on to win the match. 

In contrast, the great Indian tennis player Vijay Amritraj was known to be a highly ethical sportsman. On many occasions, he would tell the Umpire that the ball was in or out, even when a crucial point would go against him.

The Ultimatum and Dictator games are two games that reveal much about ourselves and others around us. 

The Ultimatum Game

Two players, A and B, are involved in the ultimatum game. 

  • Player A is given USD 100. Player A has to offer to share a proportion of the USD 100 with Player B. Player A can offer any amount from 0 (nothing) to the total 100 to Player B.
  • Player B can either accept the offer from Player A or decline. If Player B accepts the offer, then Player A and B get their respective amounts. On the other hand, if Player B rejects the offer, then neither Player A nor Player B gets anything.

For example, if Player A offers USD 25 to Player B and Player B rejects the offer, then both players get nothing. If however, Player B accepts the offer, then Player A would get USD 75 and Player B would get USD 25.

From a purely economic perspective, it would be logical for Player B to accept any offer above zero. This is because rejecting an offer, even if it were unfair, means that Player B would get nothing. In actual fact, observations of many such occurrences have shown that, on average, offers of less than USD 30 (30% of what Player A is given) are rejected. 

The economic lesson is that unfair offers are not entered into, even if we end up worse off. The behavioral and moral lesson is that when we are in situations like Player A, we often act selfishly. It would be so easy to share the proceeds 50:50, but we do not do so. This demonstrates one negative aspect of our human nature. 

The Dictator Game

Another aspect of human nature that is, however positive, is revealed in the Dictator Game. Here the situation is similar to the Ultimatum Game, but Player B has no choice to reject an offer from Player A. 

The purely economic option for Player A would be to offer zero to Player B. This is because Player B has to take whatever Player A offers. Player A would thus maximize personal financial returns by sharing nothing with Player B.

In actual experiments, however, it is seen that people acting as Player A nearly always share a proportion of their USD 100 with Player B. Players acting as A consider what it means to be fair and base their decisions on more than financial returns. 

The most surprising and positive experiment was done on five-year-old children. Nearly all the children shared the amount they got 50:50 with other children. This showed that before we are too conditioned by society, humans have an inbuilt nature: sharing, considerate, and kind. 

We might all think deeply about the ultimatum and dictator games and might do well by learning from the five-year-olds. Doing so would make the world so much better!

© Kaikhushru Taraporevala