THINKER'S ALMANAC - February 2

In the ultimatum game, what is the “ultimatum,” and what does it tell us about thinking?

Subject:  Ultimatum Game

Event:  Birthday of Werner Guth, 1944

Try this thought experiment.  Imagine I offer you one-hundred dollars.  The money is yours to keep, except for one catch:  You must give some of the money to another person -- a stranger who is sitting across the room.  In order for you

to keep any of the money, you must put a portion of it in an envelope, which will then be given to the stranger.  If the stranger accepts the one-time offer, you get to keep what’s left of the $100 and the stranger gets her portion.  However, if the money is rejected by the stranger, neither of you gets anything.  So, here’s the question:  how much money would you put in the envelope?

                                                                Image by Gerd Altmann from Pixabay 

If you approach this thought experiment purely logically, you might consider offering as little as $1 to the stranger; after all, one dollar is better than zero dollars.  The problem, however, is that you’re interacting with a human being, not a computer.  We like to believe that we humans are purely reasoning creatures; however, the truth is that our thinking is heavily influenced by emotion, especially when it comes to social reasoning and issues involving justice and fairness.

German economist Werner Guth, who was born on this day in 1944, made this thought experiment an actual experiment in the 1980s.  He called it the ultimatum game, due to the take-it-or-leave-it nature of the game's key transaction.  With the help of two colleagues, Rolf Schmittger and Bernd Schwarze, Guth began gathering data to determine how actual people would interact with actual money.  The results revealed that offers of less than 30 percent of the total are rejected and that most participants offer up to half of the money to their partner.  The ultimatum game shows that when it comes to human interaction, perceptions of fairness play a big role in how we make decisions.  We have the ability to reason with logic, but emotion and empathy are big parts of the recipe that makes up human cognition (1).

Recall, Retrieve, Recite, Ruminate, Reflect, Reason:  What is the ultimatum game, and what does it have to teach us about human thinking and human interactions?

Challenge - Games People Play:  Do some research on one of the other games listed below.  What does the game have to teach us about human behavior and thinking?  Pirate Game, Public Goods Game, Dictator Game, Impunity Game, Gift Exchange Game, Prisoner’s Dilemma

ALSO ON THIS DAY:  

-Today is Groundhog Day.  Watch what many would argue is the most philosophical movie ever made - Groundhog Day, starring Bill Murray.  Watch for how weatherman Phil Connors does an “If By Whiskey” about winter (See THINKER’S ALMANAC - October 2). As he is talking to the TV camera, just before the Groundhog Day ceremony is about to commence, he says the following lines.  Version 1 is early in the film when he feels stuck by his fate; Version 2 is late in the film when he had seen the light:

Version 1: “This is pitiful. A thousand people freezing their butts off waiting to worship a rat. What a hype.  Groundhog Day used to mean something in this town. They used to pull the hog out, and they used to eat it.  You’re hypocrites, all of you!”

Version 2: “When Chekhov saw the long winter, he saw a winter bleak and dark and bereft of hope. Yet we know that winter is just another step in the cycle of life. But standing here among the people of Punxsutawney and basking in the warmth of their hearths and hearts, I couldn’t imagine a better fate than a long and lustrous winter.”

Sources:

1-McRaney, D. You Are Not So Smart. New York: Gotham Books/Penguin Group, 2011.

Reading Check:

-What is the psychological insight that comes from playing the ultimatum game?

-When the ultimatum game is played, what offers are consistently rejected?