Cultural Differences in Defining “Rationality” in the Ultimatum Game
http://www.its.caltech.edu/~jensming/roots-of-sociality/phase-i/XCulturalProp-orig.pdf
In this class, we study “The Ultimatum Game,” as a way of determining how a sum of money is divided between two players. In class, we learned that the results of this game are based on each players’ outside options. If the players’ only options are each other, then the lot will be divided equally between them. However, if one player can get a higher payout by trading with a third player, then they are likely to take that option. Therefore, in a more complex network, we can compute what fraction of the lot each player will be happy receiving. This result is based on dividing the surplus of individual players’ outside options, and adding the surplus to their original payout with the original other player.
This game relies on the idea that people are rational and seek to maximize their payout. However, it is clear that a specific way of thinking, “rational,” cannot be confined to one definition. In other words, people from different cultures or backgrounds think differently and have different interpretations of what is rational. Thus, results of the ultimatum game vary across cultures. A study at Cal Tech confirmed that different cultures vary in their responses to the ultimatum game. The experimenters obtained vastly different results from people from Peruvian Amazon versus people from Machiguenga. This study shows that although the math may seem to create a neat looking answer to the ultimatum game, it is impossible for all people to act in a truly rational way, when we cannot define rational for people across all cultures. Further, this study shows how cultural differences affect people’s economic decisions. This observation is important when examining global economic trends, and the impact that different cultures and societies have on them.