Lecture 4

Learning Objectives:

• 1. What does economic theory/utility maximization say about what will happen in the ultimatum game?

  2. What actually happens:

  3. Offers: Majority of offers are above 40%, Mode occurs at 50%, Mean is between 30-50%. FAR from theory predictions.

  4. Responses: Offers less than 30% are frequently rejected -- means people choose ZERO and reject positive amount, contrary to theory.

  5. Next: WHY is there deviation from Economic Theory. Why are offers high? Preference for fairness OR Fear of Rejection?

  6. Dictator Game used to answer this question -- shows that BOTH factors are present.

  7. Why are positive amounts rejected? To enforce social norms, OR to punish bad behavior, OR because of dislike of being treated unfairly.

  8. How can we tell the difference between these feelings? Different types of games are used to differentiate

Lecture on Ultimatum Game is attached below. also three reference material are also attached below.

1. Colin Camerer ch.4 Ultimatum Game.

2. One Bad Apple: Uncertainty and Heterogeneity in Public Good Provision by Angela C. M. de Oliveira*, Rachel T. A. Croson and Catherine C. Eckel

Summary:

Previous research has demonstrated that people are not homogeneous in their social

preference (common types include Nash/selfish, conditional cooperators, and pure altruists).

Thus several factors become important in predicting and explaining public goods provision:

social preference type, group composition and the information available about the group

composition. We use an experimental design and elicit both unconditional and conditional (based

on others’ contribution decisions) provision strategies from each participant. We categorize

subjects into social preference types and recruit selfish and conditional cooperator types for a

follow-up experiment. We systematically vary the homogeneity of group composition and the

information made available to subjects about group it. We examine the effects of own type,

group composition and information on contributions. . We find that both group composition and

information impact efficiency

3. Social norms of sharing in high school: Teen giving in the dictator game by Catherine Eckel**, Philip J. Grossman, Cathleen Johnson, Angela C. M. de Oliveira, Christian Rojas and Rick Wilson*

Summary:

We conduct a study of altruistic behavior among high school students using the dictator game. We find a much stronger norm of equal splitting than previously observed in the typical university student population, with almost 45% of high school subjects choosing an equal split of the endowment. Tests indicate that this difference is not due to factors traditionally considered in the analysis of these games, such as demographics. Rather, we find that dictators who score higher on a social generosity measure and are much more likely to conform to the 50/50 norm. Additionally, high school students who score in the high range of an independence measure send significantly less to recipients.

student should summarize HSP_Dict_Dec 2010 and OBA_deOliveria Croson Eckel_2009 and device an experiment on it.