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Do Experts Play the Ultimatum Game Better than College Students Do?

In class, we discussed bargaining on networks.  A simple example of bargaining we discussed in class is the ultimatum game, where person A proposed a split of a sum of money and player B can accept or reject A’s proposition.  If B accepts, they split the money, if B doesn’t accept, no one gets anything.  In class, we used concepts like power over a network and Nash bargaining to figure out who gets what in a bargaining situation.  When this game is played in real life with real, irrational people, the results that game theory would make you expect aren’t always true.  So, when this game is played in real life, in high stakes situations, who plays it better?  Do high-powered, seasoned negotiators play it best, or do regular people beat them?

Political science researchers at the University California got former members of Congress, treasury officials and elite private sector negotiators to play the ultimatum game, to see how they played it differently from college students, and whether they played it better.  On average, the professional offered slightly more of the money, 43% versus 40% of the pot.  In addition to offering more money, they accepted less money.  If they were offered less than 31% of the pot they would refuse, whereas the college students on average would settle for as low as 25%.  Because college students are younger than these professionals, a study was done using using Amazon’s Mechanical Turk, an online labor market, in which a Ultimatum game was played between people in different age brackets to see if age was causing these differences.  The study found no difference between how people in different age brackets play the game, demonstrating the the decisions of the professionals was not a product of their age.

The surprising result of this study is that seasoned negotiators are not better at playing the game than the college students.  Most importantly, they are much more willing to turn down an offer than the college students are, even though accepting the offer would be beneficial.  The ultimatum game is an interesting example of when a typical game theory idea is brought into real life.  In this game, irrational people playing the game defy rational logic and end up making less money than they could.  What is most interesting is that when skilled bargainers play this game, they don’t end up making more money than your average college student.  Human beings are irrational, and being a trained professional does not make you immune from irrationality.  I myself would be curious to see how game theorists would play the ultimatum game in real life against college students and bargaining professionals.



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October 2016