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What's The Ultimatum Game?

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http://money.howstuffworks.com/ultimatum-game.htm

You're standing on the sidewalk with a friend, minding your own business, when a man approaches with a proposition. He offers you $20 in one-dollar bills and says you can keep the money, under one condition: You have to share some of it with your friend. You can offer your friend as much or as little as you like, but if your friend rejects your offer, neither of you get to keep any of the money. What do you do?

This isn't the premise for a spin-off of the TV show "Cash Cab"; rather, it's an economics experiment that provides some interesting insight into the human psyche. It's called the ultimatum game.

Now you've got the $20 in your hand and your friend watches you expectantly. Will you low ball your friend? Will you split the money evenly? Will you be generous?

Under a strictly utilitarian view of economics, you would give your friend the lowest possible amount. In this case you've got 20 dollar bills, so you would give your friend a dollar. Since it's found money, your friend should accept the dollar. Your friend might call you cheap, or perhaps offer a bit of gratitude drizzled generously with sarcasm -- but, hey, at least he or she made a dollar out of it.

The thing is, this strictly utilitarian view doesn't translate to how people actually behave when faced with this decision. In experiments based on the ultimatum game, test subjects on the receiving end routinely reject offers they find too low. And in others, subjects who must choose how much to give often offer more than the lowest amount.

http://en.wikipedia.org/wiki/Ultimatum_game

Most non economically inclined/educated people would rather have both themselves and their richer counterpart have nothing than be treated unfairly.

Did anyone tell the banksters this?

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<snip>

Most non economically inclined/educated people would rather have both themselves and their richer counterpart have nothing than be treated unfairly.

Did anyone tell the banksters this?

This problem isn't just limited to bankers.

It is the basic foundation of the politics of envy (as played by all tribes).

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1. the result obviously depends on whether your friend knows the rules of the game. I suspect nonbody would just turn down an offer of free money, unless they know how much was at stake for you.

2. Friend / stranger also makes a difference. Are you more likely to offer a stranger half, as they are less likely to let you get away with it. However, if it were a friend, I think I'd be inclined to give half - it was just luck that I was chosen over them, after all, and they are my friend.

Seems a rather silly and trivial game, if you ask me.

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1. the result obviously depends on whether your friend knows the rules of the game. I suspect nonbody would just turn down an offer of free money, unless they know how much was at stake for you.

Yeah, but we know the rules of the game.

2. Friend / stranger also makes a difference. Are you more likely to offer a stranger half, as they are less likely to let you get away with it. However, if it were a friend, I think I'd be inclined to give half - it was just luck that I was chosen over them, after all, and they are my friend.

Seems a rather silly and trivial game, if you ask me.

If you don't give half, you are much more likely to get nothing.

That's kind of the point. In strict economics terms it makes sense to say yes to any offer. They have done this experiment with economics majors on one side and regular people on the other. The economics majors almost uniformly walked away broke.

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Yeah, but we know the rules of the game.

If you don't give half, you are much more likely to get nothing.

That's kind of the point. In strict economics terms it makes sense to say yes to any offer. They have done this experiment with economics majors on one side and regular people on the other. The economics majors almost uniformly walked away broke.

I wonder if they've done the Pirate game with real pirates?

http://en.wikipedia.org/wiki/Pirate_game

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The game proves nothing it's just a game.

If friend has no money/not eaten they are going to accept any offer, if they have money then you'll get a different response.

The game is far too simply to explain any economics action, once you start analysing its like opening up Pandora's box.

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http://money.howstuffworks.com/ultimatum-game.htm

http://en.wikipedia.org/wiki/Ultimatum_game

Most non economically inclined/educated people would rather have both themselves and their richer counterpart have nothing than be treated unfairly.

Did anyone tell the banksters this?

Saw a study on this back in the early nineties. Now I haven't read it this time round so it may say but it aparently depends on your level of wealth what you will accept. When the studies were don on subsistence levels the people were inclined to accept much lower offers than in the affluent west. However the subsistence level were also inclined to offer more. The thing I read recons it had to do with very little is a lot to some and better make sure that when you offer you can garantee the reward (which is a lot) for yourself.

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So basically, as long as the friend is in the dark about how much the first person has then they don't mind how much they get? But as soon as they do, they care about if it is fair or not?

Surely this is the underlying principle of the BoE/treasury and the banks? Keep the public in the dark about what is really happening so that they are (relatively) happy with the money/debt they get?

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So basically, as long as the friend is in the dark about how much the first person has then they don't mind how much they get? But as soon as they do, they care about if it is fair or not?

Surely this is the underlying principle of the BoE/treasury and the banks? Keep the public in the dark about what is really happening so that they are (relatively) happy with the money/debt they get?

Or .....

So basically, as long as the friend is in the dark about how much the first person has then they don't mind how much they get? But as soon as they do, they care about if it is fair or not?

Surely this is the underlying principle of the politics of envy? Make sure that your supporters know exactly what your opponents have / get and offer a better deal to your supporters.

Both the left and the right do this. They are continually revising their offers in the "ultimate game" to try to gain power.

This is far from a trivial little game. It gives us an insight into how the political parties use the power of the state to enforce the offers that they make for their own benefit.

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http://money.howstuffworks.com/ultimatum-game.htm

http://en.wikipedia.org/wiki/Ultimatum_game

Most non economically inclined/educated people would rather have both themselves and their richer counterpart have nothing than be treated unfairly.

Did anyone tell the banksters this?

Logic would dictate offering a minimum of 50%, even 55% if you wanted to make sure that you got the cash.

It would be quite interesting for the friend to have to make the demand to see how it changed the dynamic and see whether there was any difference in failure rates.

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This happened to me.

I was walking with a mate when I picked up 20 quid.

I put the 20 in my wallet and gave him a tenner.

Different day, different result though....

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Meh I am severely dissappointed, for a moment there I thought this was going to be a discussion about 'the Ultimate game' i.e. hunting other humans in post apocalyptic Injin world.

:(

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http://money.howstuffworks.com/ultimatum-game.htm

http://en.wikipedia.org/wiki/Ultimatum_game

Most non economically inclined/educated people would rather have both themselves and their richer counterpart have nothing than be treated unfairly.

Did anyone tell the banksters this?

Some of the thinkers I most admire, from Richard Dawkins to Paul Krugman, believe this experiment and others like it offer great hope for humanity. Personally I'm not so optimistic.

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Some of the thinkers I most admire, from Richard Dawkins to Paul Krugman, believe this experiment and others like it offer great hope for humanity. Personally I'm not so optimistic.

The game does get a bit more complicated when you have one guy who picks up the $20 bill while walking down the street with 4 friends.

Negotiating a split where the "finder" and the friends are all happy is much more tricky.

This variation probably more accurately reflects the "real" world.

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The game proves nothing it's just a game.

If friend has no money/not eaten they are going to accept any offer, if they have money then you'll get a different response.

The game is far too simply to explain any economics action, once you start analysing its like opening up Pandora's box.

Err, no. It tells us quite a lot. All other things being equal, people have a sense of fairness and are willing to punish those who do not play along, even if it costs. Obviously, that is all ceteris paribus. Of course this doesn't mean that people aren't utility maximisers (as the empirical results of the ultimatum game are often portrayed) - people may be programmed to play a longer game even though the one shot nature of this is made clear to them. It does tell us that naive notions of utility maximisation do not explain human behaviour and have no place in economic theory.

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Makes me think of one of my favourite quotes:

"I wouldn't mind being poor, so long as there weren't any rich people."

Martin Amis, I think,

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Err, no. It tells us quite a lot. All other things being equal, people have a sense of fairness and are willing to punish those who do not play along, even if it costs. Obviously, that is all ceteris paribus. Of course this doesn't mean that people aren't utility maximisers (as the empirical results of the ultimatum game are often portrayed) - people may be programmed to play a longer game even though the one shot nature of this is made clear to them. It does tell us that naive notions of utility maximisation do not explain human behaviour and have no place in economic theory.

There is another version where men and women are offered similar options, but with a stop loss attached.

The women nearly universally go for the "i win/you win" approach of trading down to the lowest amount if it is offered after the first rejection while the men nearly universally carry on saying "****** you, we'll both still lose"

So if the initial offer is a 19:1 split in the offerors favour and it is rejected and then a 1 dollar even split is offered, women will say yes and men will say no.

Which is interesting, evolutionarily speaking...

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Makes me think of one of my favourite quotes:

"I wouldn't mind being poor, so long as there weren't any rich people."

Martin Amis, I think,

There was a post on HPC recently,

"a banker, a benefits claimant, and a Daily Mail reader are having a cup of tea together. They decide to order some biscuits and a plate of six Hob Nobs arrive. The banker takes five and turns to the Daily Mail reader, "be careful of him" he says, pointing to the benefit claimant, "he's got his eye on your biscuit".

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http://money.howstuffworks.com/ultimatum-game.htm

http://en.wikipedia.org/wiki/Ultimatum_game

Most non economically inclined/educated people would rather have both themselves and their richer counterpart have nothing than be treated unfairly.

Did anyone tell the banksters this?

Both are trying, not just to make a profit out of this game, but of all subsequent games. Even if there is no subsequent game, our minds have to believe that there are, because in real life, those subsequent games happen. A bit like stone age man hunting for meat. If only one makes a kill, they will share equally in the hope that they will take a share when they fail to make a kill. Everyone playing equally supports everyone else, someone not sharing will quickly be ostracised.

And if people are to cooperate and prosper, you want to deal with people who treat you fairly, and build up trust. You are often willing to make a sacrifice or two, in the hope of being repaid, and if you dont get repaid, you know who not to trust.

And that is why so many will refuse an uneven split of the money. If someone wont deal with you fairly, then best not to deal with them at all, find someone else instead.

Psycopaths, who make up a small fraction of the population, play on this desire we have of finding people we can trust. They will build up trust up to a point you can be ripped off, and then scarper. It isnt surprising that they can make friends more easily, they have to, because they are going to betray those new friends sooner rather than later.

But for the rest of us, we want to build up trust and are prepared to be ripped off a bit, in order to find that long lasting trading relationship that is mutually beneficial to those involved.

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But for the rest of us, we want to build up trust and are prepared to be ripped off a bit, in order to find that long lasting trading relationship that is mutually beneficial to those involved.

It works at a purely evolutionary (non-concious) level. Vultures circle carrion to let other vultures know it's there.

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Both are trying, not just to make a profit out of this game, but of all subsequent games. Even if there is no subsequent game, our minds have to believe that there are, because in real life, those subsequent games happen. A bit like stone age man hunting for meat. If only one makes a kill, they will share equally in the hope that they will take a share when they fail to make a kill. Everyone playing equally supports everyone else, someone not sharing will quickly be ostracised.

And if people are to cooperate and prosper, you want to deal with people who treat you fairly, and build up trust. You are often willing to make a sacrifice or two, in the hope of being repaid, and if you dont get repaid, you know who not to trust.

And that is why so many will refuse an uneven split of the money. If someone wont deal with you fairly, then best not to deal with them at all, find someone else instead.

Psycopaths, who make up a small fraction of the population, play on this desire we have of finding people we can trust. They will build up trust up to a point you can be ripped off, and then scarper. It isnt surprising that they can make friends more easily, they have to, because they are going to betray those new friends sooner rather than later.

But for the rest of us, we want to build up trust and are prepared to be ripped off a bit, in order to find that long lasting trading relationship that is mutually beneficial to those involved.

Which explains why bankers and other financial types require the backing of the state - no one would deal with them voluntarily.

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Both are trying, not just to make a profit out of this game, but of all subsequent games. Even if there is no subsequent game, our minds have to believe that there are, because in real life, those subsequent games happen. A bit like stone age man hunting for meat. If only one makes a kill, they will share equally in the hope that they will take a share when they fail to make a kill. Everyone playing equally supports everyone else, someone not sharing will quickly be ostracised.

And if people are to cooperate and prosper, you want to deal with people who treat you fairly, and build up trust. You are often willing to make a sacrifice or two, in the hope of being repaid, and if you dont get repaid, you know who not to trust.

And that is why so many will refuse an uneven split of the money. If someone wont deal with you fairly, then best not to deal with them at all, find someone else instead.

Psycopaths, who make up a small fraction of the population, play on this desire we have of finding people we can trust. They will build up trust up to a point you can be ripped off, and then scarper. It isnt surprising that they can make friends more easily, they have to, because they are going to betray those new friends sooner rather than later.

But for the rest of us, we want to build up trust and are prepared to be ripped off a bit, in order to find that long lasting trading relationship that is mutually beneficial to those involved.

I mostly agree.

There is an additional factor to consider in your hunting analogy. If the group contains one especially strong and accurate hunter because of either genetic good fortune or exceptionally hard work, he may feel that it is fair that he gets a larger than proportional / equal share of each successful kill. If the group don't agree to give this hunter a larger share and he is good enough to survive on his own, he may choose to leave the group and be much better off and leave the rest of the group much worse off.

The analogy can be extended to "real life" in a democracy where there are a large number of mostly average people and a very small number of very highly skilled people which distorts the relationship between reward and contribution.

Mutually beneficial sharing makes sense when "mutually beneficial" is fully understood.

I do not see any political party that truly understands what "mutually beneficial" actually means. The reason for this must be either that politicians are greedy or that people are not able to understand the concept or, most likely, that both conditions apply.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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