What's the ultimatum game?

The ultimatum game is an economics experiment that provides insight into the human psyche. Check out our HowStuffWorks podcast to learn about the rules to the ultimatum game.

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Episode Transcript

Speaker 1 (00:00):
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(00:20):
resolves online fraud safe secure Visa. Hey, and welcome to
the podcast. Josh Clark, Chuck Bryant. Here. How's it going, Chuck?
It's going great, Josh. You I'm doing pretty good. I'm
doing pretty good. I've often wanted, Chuck, if you won
the lottery, like, who would you share any of your
proceeds with? I mean, would you? Obviously your wife Emily

(00:42):
would would reap the benefits of this um, But I mean,
is there anybody else, like your parents? Would you buy
him a boat? Or you know who would you share
it with? In in what amount? Have you ever thought
about that? Yeah? Yeah, I think everyone kind of thinks
about this. I don't play the lottery, first of all,
because I think it's a suckers game. But if I
found a lottery ticket and won a lot of money,

(01:02):
I would be pretty generous, I thinky okay. I've always
liked to think the same thing, um to the to
the to the point where you know, I kind of
have allotments of like, you know, who would get what
based on how much I won? Um. The thing is,
it's all kind of esoteric at this point. Everyone's generous
in theory. Yeah, and I wonder how much that would
change with cash in hand. Um. And I was actually

(01:25):
reading an article about a guy who's in Melbourne who
this actually happened to. Uh. One of his friends off
handedly suggested, uh, he buy a lottery ticket, and the
guy went in, bought it and actually won thirteen million dollars.
He's got the money in hand and he's still sharing
it with his buddy who just suggested he buy a ticket.

(01:45):
You know. So, um, it is nice. But at the
same time, uh, this guy's actions flying in the face
of all theories and all sorts of different disciplines evolution, economics, games, Arie.
Have you heard of this guy named Ariel Rubinstein? I
have I like all Ariel, do you? Yes? He seems

(02:07):
like a pretty approachable guy from what I understand that
he came up with this thing called the ultimatum game
in the early eighties. I think, yeah, something like that,
uh and he UM. Let me just give a quick
rundown of the ultimatum game, okay, okay, So basically, uh,
some guy comes up to you and I chuck and
uh hands uh hey, hands you twenty one dollar bills
and he says yeah. I'd say, chuck, come back, and

(02:30):
that guy would be like, where what's your friend's name?
And I'd be all like, I don't know, I don't
know him. You know, I just met him at number
sixteen bus shelters. Somebody would get those one dollar bills, right. So, well,
let's say you did stick around. Your curiosity was peaked
because some stranger came up and gave you twenty one
dollar bills UM, and he had some instructions that went

(02:51):
along with it, UM, namely that you had to split
it with me in any way you saw fit. I
had the ability need to reject any offer you gave me.
But if I reject your offer, then neither one of
us gets squat. He takes the twenty bucks back, right right,
So I could give you a dollar keep nineteen. You

(03:11):
could say no, thanks, jerk, and uh, the guy takes
his money back. Right. But the thing is under under
this thing called rational maximization, which is an economic theory
that basically all people are out for the most for themselves.
You shouldn't even be concerned with the idea that I
would reject your offer. Number one, you should give me
one dollar because that's the least amount you have, right um.

(03:35):
And secondly I should take it. It's found money, and
that should be that you got nineteen I've got a dollar.
I may be mad at you, but still I didn't
do anything for the buck, right, Um, So that makes
perfect sense in theory. Uh. And Ariel Rubinstein is very
very well respected game theorists, except for this one. Just magnificent. Uh,

(03:59):
just terrible predictions. Right, This is a blot on his record. Right.
So these German economists put it to the test, put
the ultimatum game to the test in real life, and
they found that they're they're what they What they found
was that there was no support for Rubinstein's hypothesis whatsoever. Right, people,
I think they found gave an average of thirty seven

(04:21):
percent of the money away. And then what I thought
was really interesting was that half of the people who
uh received um or less would not accept it. They
rejected the offer even though it was found money. And
and in other cases there's there were more generous offers
than there needed to be. Right. So if they got uh,

(04:42):
let's say it was twenty deutsch marks, I guess now
the euro, but back then it was deutch marks, they
would give them three and they just threw it right
back in his face exactly. Um, that doesn't make any
sense again, right, So it was enough to get the
curiosity of economists and mathematicians and and uh, you know
all sorts of other people uh peaked right, um. And

(05:05):
so they started looking into this and they're like, well,
game theory, it makes sense, but there's there's a flaw
here there. Let's tweak it a little bit. They tried variations, right,
and one of the ones that they came up with
was the Dictator game. Right. I like this one, Yeah,
this this one makes a little more sense to me.
And yet it's still just it doesn't make any sense. Basically,
under the Dictator game, it's the same thing as the

(05:27):
Ultimatum game, except uh, they give me twenty bucks to
share with you. I can either take two dollars and
give it to you and keep eight team for myself,
or I can half the twenty dollars with you and
and and split it equally. Either way, you have to
accept the offer and I get to keep the money
no matter what. So there's there's there's no loss for me.

(05:49):
And yet they found that like seventy six percent of
the people who played the Dictator game split the twenty
bucks in half, even though they knew that if if
they gave the other person two bucks they got they
kept eighteen. And as far as I know, these people
are actually keeping the money to make this a very
real thing, to really gauge people's reactions, and and the
vast majority of the people were splitting things evenly. This

(06:12):
is mind boggling, don't you agree it is? But you
know it was Germany and it's called the Dictator game,
so that if they made a little bit of afraid
on what was to convert exactly with their rib turtleneck sweaters.
And yeah, so um this further piqus people's curiosity. Like
Rubinstein inadvertently just set off this huge chain reaction that

(06:33):
people's entire careers have been built on his one prediction
of the Ultimatum game. Right, Um, so they start they
start looking into theories about sharing and altruism. And we
actually did a podcast how altruism works based on an
article called is there such a thing as a truly
unselfish act? And altruism shouldn't exist, you know, rational maximization

(06:59):
should be has it falls in line with evolutionary theory.
But I mean, so, what is that the human spirit?
Or is that something we've developed? No one has any idea. Um,
and and they we don't even know if it's human. Actually, um,
they've done some studies. They did one on chimps and
they show zero. Uh, they don't show any sense of fairness.

(07:19):
They don't mind if they're if they're getting screwed out
of something, as long as they get something. They don't
care in what amount or how much someone else is getting.
But other monkeys have shown a sense of fairness, specifically
the cappuccine monkey. Yeah, this is a cool study. Did
you ever see Monkey Shines? Uh? No, you didn't see
Monkey Shines? Okay, well, wow, it was pretty good. Actually

(07:42):
it's a it's a horror movie about a out of
control helper monkey who just goes on the rampage like
Silent Night, Deadly Night, except with the monkey. That's exactly
why I didn't see it. No, thank you, it was okay. Um, well,
basically this is the same kind of monkey, and they're
very smart and they're off news for helper monkeys. Um.
And these researchers just down the road apiece at Emory

(08:05):
University ran this experiment on them, and so they would
put some monkeys together and they'd have them get the
retrieve a pebble, and in return for bringing the researcher
a pebble, both monkeys would get cucumbers. Uh. Now, I
for a while, one monkey would would get a grape
in return for retrieving a pebble, while the others still

(08:28):
got cucumbers. So one monkey's kind of like, you know
what's going on. And then after a while, while one
monkey still had to retrieve a pebble to even get
a cucumber, the other monkey was getting grapes for doing nothing.
And this led to monkeys getting upset, yeah, throwing food,
refusing to play and really, I mean, like capucine monkeys,
if you've never seen when you really have to go

(08:49):
onto h what's the ultimatum game on how stuff works?
If they're the cutest things on the planet, I can't
imagine seeing one of these just acting hurt. Yeah, it's
kind of a mean experien a man. It happened just
down the road. But apparently it let us know that
humans aren't the only ones with this higher mind sense
of fairness kind of thing. Ultimately, though, we still have

(09:10):
no idea what's going on, right. I did think it
was interesting interesting that um people that participated in the
in the game, they they found that they looked for
nonverbal cues from their partner in the game to try
and pick up what they think they should give. And
it kind of made me think, you know, any study
where you know you're being studied I kind of have

(09:31):
not problems with. But you wonder, you know, if I
knew that someone was giving me this twenty dollar bill,
I would give away half of it just so wouldn't
mean it wouldn't seem like a schmuck, right exactly. It's
like Heisenberg's uncertainty principle. You know, just by observing something
you change its behavior. Uh. And I wonder how much
that factors into this too, And that that nonverbal cue
study you were talking about it seemed a little hinky

(09:54):
to me. I wasn't sure how much faith I put
in it, But I wonder how much of that lack
of faith is driving just the the idea that that's
just such a depressing um notion that we're really all
always in fact out for ourselves and trying to rationally maximize,
and we're actually doing it through non verbal cues sizing
up how generous we think the other person will be

(10:15):
for a big payoff later on. Like you and I
are walking down the street and I see a twenty
on the ground. I looked as I pick it up,
and then I look to see if you saw me
pick it up pretty much and maybe if I notice
you saw me, I'll share it with you. If you
didn't notice, then what twenty? Right? And even if even
if you just kind of go across the board and

(10:36):
help everybody equally, just as a general rule, how much
of that uh is based on a belief in karma,
you know, karmic deck, karmic payback, that kind of that
you think that you're going to ultimately receive a rule
and that's why you do it, which leads us back
to you know that altruism definitely, which apparently doesn't exist,
And I don't know, I figure five ten years down

(10:56):
the road will have the uh the specific you know,
edit code for altruism or are faking of altruism down? Well,
I do know if someone came and gave us twenty
one dollar bills and we'd probably head down to the
dance club and every everything would be fine. We'd probably
we wouldn't split it evenly. We just go ahead and
throw it on stage at the same time. Exactly, Okay,
that's yeah, exactly. Well, this is a pretty dense topic.

(11:20):
It's a really interesting article. I suggest you guys go
read it What's the Ultimatum Game on how Stuff Works
dot Com and stick around to find out which article
has chucked very nervous for next week? So, Chuck, what
article has you very nervous? Well, Josh, next week, I'm

(11:41):
going to visit the in laws in Akron, Ohio, and
we have plans to go to Cedar Point Suited Point,
which is the greatest amusement park on the planet. That's
what I've heard. My wife has been touting it as
for years. You gotta go on the Millennium Coaster. It
is the scariest experience you will ever go through. You're
basically falling four forward as you go down this um,
I think ninety degree or maybe more than ninety degree hill.

(12:05):
It's it's mind bending, lee scary. I can't wait, and
I love roller coasters, but it does have me a
little worried. In the article that we have on our website,
what if I were on a roller coaster and the
safety harness broke by our our veteran writer Katherine Hear, Yeah,
I don't know that you should read that before you go.
You might want to save that work for after. Good idea. Yeah,
so you can find out what would happen if the

(12:26):
safety harness broke while you're on a roller coaster on
how stuff works dot com. But again, like Chuck, I
advise you to read it after you get back from
the amusement park for more on this and thousands of
other topics. Is it how stuff works dot com? Let
us know what you did. Send an email to podcast
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(12:48):
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