Play the Ultimatum Game

July 21, 2021


Are you a rational or an emotional person (or a mix of the two)?

Shall we play the Ultimatum Game to find out?

This is a simple, take-it-or-leave-it ‘bargaining environment’. Say, a stranger (call him GameOwner) brings another stranger (GamePlayer) up to you and asks you for your participation in an activity. You agree. GameOwner and GamePlayer do not know each other and have just been introduced. So, all three of you are strangers to each other.

GameOwner then takes out a bunch of ten-rupee notes and speaks to GamePlayer in front of you: “I am giving you ten ten-rupee notes – that is a hundred rupees. You can share how many notes you wish with this person (that’s you!).”

GameOwner then talks to you: “When you receive the money, if you choose to keep whatever you receive, GamePlayer keeps what is left with him. If you reject the offer from GamePlayer, I get back the whole amount – that is, a hundred rupees – from him!

A key condition: both of you are not allowed to speak”

GameOwner then gives GamePlayer the ten-rupee notes. And do you know what GamePlayer does?

He keeps eight of those ten notes and gives you just two!

What do you think you will do? Will you keep the twenty rupees, or will you reject it?

The Ultimatum Game was designed forty years ago, in 1982, and is now one of the most popular games in Behavioural Economics, having been played thousands of times all over the World. The key result of Ultimatum Game experiments is that most proposers offer between 40% and 50% of the endowed amount, and that this split is almost always accepted by responders. What does this tell us?

That, by and large, people are fair, and you can trust them. (Are you willing to accept this? When I first read about the results, I wondered which planet they were referring to, but, of late, I am more receptive to positive news)

Now for the next (and final) question: what did you do in that Game – did you accept the twenty rupees (rational behaviour) or reject it (emotional, because it is so unfair)?

What experiments reveal is that, when the proposal falls to 20% of the endowment (that is, a person gets two out of ten notes, say), it is rejected about half of the time, and rejection rates increase as the proposal falls to 10%.

(results quoted from Experimental Economics and Experimental Game Theory, Daniel Houser and Kevin McCabe)

The reason we tend to reject a bad offer is because the decision to do so is taken by a part of the brain called the amygdala which is the chap within responsible for social and emotional decisions. The amygdala triggers a desire to punish the GamePlayer for being unfair.

Fascinatingly, people with damaged amygdalae are generous to a fault! They will continue to trust someone and accept their bad offers.

(For more on amygdala, the brain – and about everything else – read up a brilliant book called Behave, by Robert Sapolsky).

At the core of effective influencing is a deep knowledge of oneself, the capacity to intuit the needs and emotions of others and the ability to respond with empathy. Conventional styles centre around tactics and games and display of power, with both parties looking to maximise their individual outcomes. While this may work in one-off transactions, in the long run it could harm inter-personal relationships and make people more resistant in their dealings with the influencer.Our leadership skills programs are structured therefore to deepen self-awareness of leaders in terms of their beliefs about themselves and others.

To know more about how you can negotiate for a win-win and effectively manage stakeholder interests please visit https://www.navgati.in/influencing-programs/ and explore our range of negotiation skills training programs and influencing skills training programs.

Our ‘Winfluence’ program emphasizes on values based, principled negotiations that seeks mutually satisfying outcomes. Participants learn counter-intuitive ways of influencing people with whom we need to sustain long-term relationships – team members, peers, superiors and customers,
Visit https://winfluence-in-action.blogspot.com/ for more insightful reads on the topic.


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