Strategic Self-Interest Can Explain Seemingly 'Fair' Offers in the Ultimatum Game

23 Pages Posted: 28 Aug 2012 Last revised: 6 Mar 2013

See all articles by Jordan Wells

Jordan Wells

New York University School of Law

David G. Rand

Massachusetts Institute of Technology (MIT)

Date Written: March 5, 2013

Abstract

Behavioral and economic analysis of law fundamentally depends on understanding what motivates individual actors. While it is often assumed that people care only about maximizing their own monetary payoff, recent experimental work has challenged this assumption. A canonical example involves experiments using the “Ultimatum Game”, which consistently find much higher rates of equitable bargaining behavior than would be expected based on rational self-interest. It has been argued that this prevalence of equitable offers in one-shot anonymous interactions is at least partially explained by proposers having a preference for fair outcomes. We, however, argue that equitable offers in the Ultimatum Game can be entirely explained by the strategic reasoning of rational self-interested proposers. We introduce a modified version of the game in which prosocial motivations related to fairness are completely removed. In our experiment, the only reason to make a non-zero offer is the strategic desire to avoid one’s proposal being rejected by one’s counterparty. We find no significant difference in offers between this design and a standard ultimatum game. These results indicate that self-interest alone is sufficient to explain the observed equitable offers, and call into question the sentiment that innate generosity can be even partially relied upon as a motivator in the context of inherently adversarial bargaining interactions.

Keywords: fairness, self-interest, inequity aversion, law and economics

JEL Classification: K00, C70, C91, D03, D64

Suggested Citation

Wells, Jordan and Rand, David G., Strategic Self-Interest Can Explain Seemingly 'Fair' Offers in the Ultimatum Game (March 5, 2013). Available at SSRN: https://ssrn.com/abstract=2136707 or http://dx.doi.org/10.2139/ssrn.2136707

Jordan Wells

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012
United States

David G. Rand (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

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