The Ultimatum Game
http://this.sott.net/articles/show/214842-Westerners-vs-the-World-We-are-the-WEIRD-ones
In class we discussed the topic of network exchange and bargaining. One specific experiment is the Ultimatum Game, in which two people must divide ten dollars. One person proposes how much he keeps for himself, and how much he gives to the other person. The other person then approves or rejects the proposal; if he approves, than each person keeps the proposed amount. Otherwise, each person gets nothing.
From a purely rational perspective, it makes sense for the receiving partners to accept any offer; some money is better than no money right? However, when the experiment was run among UCLA graduate students, the overwhelming majority of partners who were presented with an unfair deal (50/50) rejected the offer. Most participants would rather go home empty-handed with the feeling that justice had been served. When the same experiment was repeated with $100 instead of $10, participants were no more likely to accept an inequitable split. “What this study demonstrates is our deep-rooted belief in fairness and the great lengths to which we’ll go to defend it”.
The researchers then decided to test the cultural universality of fairness, bringing the experiment into the Peruvian Amazon to visit the Machiguenga tribe, where families are self-sufficient and grow and gather their own food. There, the Machiguenga “felt rejecting was absurd, which is really what economists think about rejection…It’s completely irrational to turn down free money.” Unlike the UCLA participants and their common 50/50 split, most Machiguenga offered an 85/15 split, and partners nearly always chose to accept the offer, “adhering remarkably closely to a rational economic model: from a purely objective, utilitarian perspective, it’s logical to accept any offer rather than end up with nothing.” Rather than view themselves as being treated unfairly, they viewed any offer as a gift, and that it was just bad luck that one was selected as a chooser instead of a proposer.
Thus, “fairness” acts as an external force that sways peoples thinking. The definition of “fairness” varies with different cultures; the Machiguenga simply have a different perception of what’s fair. In the end, this shows that real people’s payoffs are not well modeled by strict money maximization.