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Articles - Camerer

6 important questions on Articles - Camerer

Describe the ultimatum game

Two players are given a sum of money. The first player, Proposer, offers some portion of the money to the second player, Responder. If Responder accepts, he gets what is offered, and Proposer gets the rest. If the Responder rejects, both players get nothing. If both players are income maximisers, and Proposer knows this, then he should offer a penny (or smallest unit of currency available) and Responder should accept. Instead, offers are usually around 30%-40% of total. Offers of less than 20% are often rejected.

Describe the dictator game

First player, Allocator, makes decision regarding an offer and the second player, Recipient, must accept. This can tell us if Proposers in ultimatum games who offer more than they have to are fair-minded or feared having low offers reject. Result: both mattered. Offers in dictator games are lower than in ultimatum games, but are still positive.

Describe the fairness equilibrium

agents differentiate between an intentional act of meanness, which they will punish, and an inadvertently mean act, which they will tolerate. Prisoner’s dilemma: Nash equilibrium for both is to defect. This is a fairness equilibrium, since both players are punishing the other’s uncooperative action.

Based on the predictions of standard game theory, how do you expect Proposers and Receivers to act in the ultimatum game if both players are income maximers?

Standard game theory assumes self-interest. If both players are income maximizers, and Proposers know this, then the Proposer should offer a penny (or the smallest unit of currency available), and the Responder should accept. (p. 210)

How do Proposers and Receivers act in the laboratory experiments Camerer and Thaler describe?

Offers typically average about 30-40 percent of the total, with a 50-50 split often the mode. Offers of less than 20 percent are frequently rejected (p. 210)

How could the difference between game theoretic predictions and the findings in experiments be explained?

Interpretation is controversial. According to Camerer and Thaler, the findings are an anomaly and not an artifact. Nationality of the players and size of stakes do not fundamentally influence the findings. (The appearance of) fairness seems more important to Responders.