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Dictator game

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The dictator game is a popular experimental instrument in social psychology and economics,[1] a derivative of the ultimatum game. The term "game" is a misnomer because it captures a decision by a single player: to send money to another or not.[2] Thus, the dictator has the most power and holds the preferred position in this “game.” Although the “dictator” has the most power and presents a take it or leave it offer, the game has mixed results based on different behavioral attributes.[3] The results – where most "dictators" choose to send money – evidence the role of fairness and norms in economic behavior, and undermine the assumption of narrow self-interest when given the opportunity to maximise one's own profits.[4]

Description

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The dictator game is a derivative of the ultimatum game, in which one player (the proposer) provides a one-time offer to the other (the responder). The responder can choose to either accept or reject the proposer's bid, but rejecting the bid would result in both players receiving a payoff of 0. In the dictator game, the first player, "the dictator", determines how to split an endowment (such as a cash prize) between themselves and the second player[5] (the recipient). The dictator's action space is complete and therefore is at their own will to determine the endowment, which ranges from giving nothing to giving all the endowment. The recipient has no influence over the outcome of the game, which means the recipient plays a passive role.

While the ultimatum game is informative, it can be considered an over simplified model when discussing most real-world negotiation situations. Real-world games tend to involve offers and counteroffers while the ultimatum game is simply player one placing forward a division of an amount that player 2 has to accept or reject. Based on this limited scope, it is expected that the second player will accept any offer they are given, which is not necessarily seen in real world examples.[3]

Application

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The initial game was developed by Daniel Kahneman in the 1980s and involved three parties, with one active and two passive participants. However, it was only in 1994 that a paper by Forsythe et al. simplified this to the contemporary form of this game with one decision-maker (the dictator) and one passive participant (the recipient). One would expect players to behave "rationally" and maximize their own payoffs, as shown by the homo economicus principle; however, it has been shown that human populations are more “benevolent than homo economicus” and therefore rarely do the majority give nothing to the recipient.[6]

In the original dictator game, the dictator and the recipient were randomly selected and completely unknown. However it was found that the result was different depending on the social distance between the two parties. The level of "social distance" that a dictator and a recipient have changes the ratio of endowment that the dictator is willing to give. If the dictator in the game has anonymity with the recipient, resulting in a high level of social distance, they are most likely to give less endowment, whereas players with a low level of social distance, whether they are very familiar with each other or shallowly acquainted, are more likely to give a higher proportion of the endowment to the recipient.[5]

When players are within an organization, they are likely to have a low level of social distance. Within organizations, altruism and prosocial behavior are heavily relied on in dictator games for optimal organizational output. Prosocial behavior encourages the “intention of promoting the welfare of the individual, group, or organization toward which it is directed”.[7]

Experiments

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In 1988 a group of researchers at the University of Iowa conducted a controlled experiment to evaluate the homo economicus model of behavior with groups of voluntarily recruited economics, accounting, and business students. These experimental results contradict the homo economicus model, suggesting that players in the dictator role take fairness and potential adverse consequences into account when making decisions about how much utility to give the recipient.[8] A later study in neuroscience further challenged the homo economicus model, suggesting that various cognitive differences among humans affect decision-making processes, and thus ideas of fairness.[9]

Experimental results have indicated that adults often allocate money to the recipients, reducing the amount of money the dictator receives.[2][8][10][11] These results appear robust: for example, Henrich et al. discovered in a wide cross-cultural study that dictators allocate a non-zero share of the endowment to the recipient.[12] In modified versions of the dictator game, children also tend to allocate some of a resource to a recipient and most five-year-olds share at least half of their goods.[13]

A number of studies have examined psychological framing of the dictator game with a version called "taking" in which the player "takes" resources from the recipient's predetermined endowment, rather than choosing the amount to "give".[14][15] Some studies show no effect between male and female players, but one 2017 study reported a difference between male and female players in the taking frame, with females allocating significantly more to the recipient under the "taking" frame compared to the "giving" frame, while males showed exactly the opposite behavior – nullifying the overall effect.[16]

In 2016, Bhogal et al. conducted a study to evaluate the effects of perceived attractiveness on decision-making behavior and altruism in the standard dictator game, testing theories that altruism may serve as a courtship display. This study found no relationship between attractiveness and altruism.[17]

If these experiments appropriately reflect individuals' preferences outside of the laboratory, these results appear to demonstrate that either:

  1. Dictators' utility functions include only money that they receive and dictators fail to maximize it.
  2. Dictators' utility functions may include non-tangible harms they incur (for example self-image or anticipated negative views of others in society), or
  3. Dictators' utility functions may include benefits received by others.

Additional experiments have shown that subjects maintain a high degree of consistency across multiple versions of the dictator game in which the cost of giving varies.[18] This suggests that dictator game behavior is well approximated by a model in which dictators maximize utility functions that include benefits received by others, that is, subjects are increasing their utility when they pass money to the recipients. The latter implies they are maximizing a utility function that incorporates the recipient's welfare and not only their own welfare. This is the core of the "other-regarding" preferences. A number of experiments have shown that donations are substantially larger when the dictators are aware of the recipient's need of the money.[19][20] Other experiments have shown a relationship between political participation, social integration, and dictator game giving, suggesting that it may be an externally valid indicator of concern for the well-being of others.[21][22][23][24] Regarding altruism, recent papers have shown that experimental subjects in a lab environment do not behave differently to other participants in an outside setting.[25] Studies have suggested that behavior in this game is heritable.[26][27]

Challenges

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The idea that the highly mixed results of the dictator game prove or disprove rationality in economics is not widely accepted. Results offer both support of the classical assumptions and notable exceptions which have led to improved holistic economic models of behavior. Some authors have suggested that giving in the dictator game does not entail that individuals wish to maximize others' benefit (altruism). Instead they suggest that individuals have some negative utility associated with being seen as greedy, and are avoiding this judgment by the experimenter. Some experiments have been performed to test this hypothesis with mixed results.[28][2]

Additionally, the mixed results of the dictator game point to other behavioral attributes that may influence how individuals play the game. Specifically, people are motivated by altruism and how their actions are perceived by others, rather than solely by avoiding being viewed as greedy. There have been experiments that more deeply study people's motivations in this game. One experiment showed that females are more likely to value altruism in their actions than males. They are also more likely to be more altruistic towards other females than to males. This proves that there are many extraneous variables that may influence players’ decisions in the dictator game, such as an individual’s own motivations and the other players.[29]

Variants

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The Trust Game is similar to the dictator game, but with an added first step. It is a sequential game involving two players, the trustor and the trustee.[30] Initially called the Investment Game by Berg, Dickhaut and McCabe in 1995, the trust game originated as a design experiment to study trust and reciprocity in an investment setting.[31] In the trust game, the trustor first decides how much of an endowment to give to the trustee. The trustor is also informed that whatever they send will be tripled by the experimenter. Then the trustee (now acting as a dictator) decides how much of this increased endowment to allocate to the trustor. Thus the dictator's (or trustee's) partner must decide how much of the initial endowment to trust with the dictator (in the hopes of receiving the same amount or more in return). In this game, it is all about trust and trustworthiness in order to determine the behavior of the two players.[32] Since trust is an important factor in economic behavior, trust and trustworthiness must be addressed at an individual level by utilizing experimental designs involving both roles in different trust games.[32] The experiments rarely end in the subgame perfect Nash equilibrium of "no trust". Often, studies found that having more trust resulted in the participant losing more in the end.[32] Since the decision to trust is dependent on the belief that the other participant will reciprocate, according to Berg et al.'s study, then the first participant will usually send an endowment even when they are not expecting anything back, similar to the practical conditions of participating in the lottery.[32] This is because the trustor wants to avoid the responsibility of leaving the trustee with no endowment and risking zero payoffs at the end of the game.[32] A pair of studies published in 2008 of identical and fraternal twins in the US and Sweden suggests that behavior in this game is heritable.[33]

Betrayal aversion is another major factor that weighs the impact of trust and risk, determining whether trusting another person is equivalent to taking a risky bet.[34] Initially coined by Bohnet and Zeckhauser, betrayal aversion could prevent the trustor from not trusting the trustee due to the social risk of having zero payoffs.[34] Their study looked at a practical experiment where participants were randomly paired with one another to increase the probability that the outcome would be dependent on the actions of the trustee selected. Results from the study showed that regardless of whether the trustor placed a safe or risky bet, the payoffs were not equivalent to the trustee's payoffs.[34] Ultimately, Bohnet and Zeckhauser assessed potential risk with the Trust Game and the relative hesitation made by each participant when deciding the amount to give in the game.

A variation of the dictator game called the "taking" game (see “Experiments" section above for further detail) emerged from sociological experiments conducted in 2003, in which the dictator decides how much utility to “take” from the recipient's pre-determined endowment. This dictator game variation was designed to evaluate the idea of greed, rather than the idea of fairness or altruism generally evaluated with the standard dictator game model, also referred to as the "giving" game.[16]

See also

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References

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  1. ^ Guala, Francesco; Mittone, Luigi (October 2010). "Paradigmatic experiments: The Dictator Game" (PDF). The Journal of Socio-Economics. 39 (5): 578–584. doi:10.1016/j.socec.2009.05.007.
  2. ^ a b c Bolton, Gary E.; Katok, Elena; Zwick, Rami (August 1998). "Dictator game giving: Rules of fairness versus acts of kindness". International Journal of Game Theory. 27 (2): 269–299. CiteSeerX 10.1.1.47.229. doi:10.1007/s001820050072. S2CID 6044302.
  3. ^ a b Watson, Joel. Strategy: An Introduction to Game Theory. Vol. 139. New York.
  4. ^ Camerer, Colin; Thaler, Richard H (May 1995). "Anomalies: Ultimatums, Dictators and Manners" (PDF). Journal of Economic Perspectives. 9 (2): 209–219. doi:10.1257/jep.9.2.209. Archived from the original (PDF) on 2019-03-14. Retrieved 2019-02-03.
  5. ^ a b Andreoni, James; Harbaugh, William T.; Vesterlund, Lise (2008). "Altruism in Experiments". The New Palgrave Dictionary of Economics. London: Palgrave Macmillan. pp. 1–7. doi:10.1057/978-1-349-95121-5_2789-1. ISBN 978-1-349-95121-5.
  6. ^ Engel, C (2011). "Dictator Games: A Meta Study". Experimental Economics. 14 (4): 583–610. doi:10.1007/s10683-011-9283-7. hdl:11858/00-001M-0000-0028-6DAA-8. S2CID 195330301.
  7. ^ Brief and Motowildo, 1986, p. 711
  8. ^ a b Forsythe, Robert; Horowitz, Joel L.; Savin, N.E.; Sefton, Martin (May 1994). "Fairness in Simple Bargaining Experiments". Games and Economic Behavior. 6 (3): 347–369. doi:10.1006/game.1994.1021.
  9. ^ Camerer, Colin; Loewenstein, George; Prelec, Drazen (February 2005). "Neuroeconomics: How Neuroscience Can Inform Economics". Journal of Economic Literature. 43 (1): 9–64. CiteSeerX 10.1.1.133.8842. doi:10.1257/0022051053737843. S2CID 155893587.
  10. ^ Liebe, Ulf; Schwitter, Nicole; Tutic, Andreas (2019). "Objective Status, Subjective Status and Prosociality of Swiss Apprentices". Swiss Journal of Sociology. 45 (1): 57–81. doi:10.2478/sjs-2019-0004.
  11. ^ For an overview see Camerer, Colin F. (2011). Behavioral Game Theory: Experiments in Strategic Interaction. Princeton University Press. ISBN 9781400840885.
  12. ^ Henrich, Joseph; Boyd, Robert; Bowles, Samuel; Camerer, Colin; Fehr, Ernst; Gintis, Herbert (2004). Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies. Oxford University Press. ISBN 9780199262045.
  13. ^ Gummerum, Michaela; Hanoch, Yaniv; Keller, Monika; Parsons, Katie; Hummel, Alegra (2010-02-01). "Preschoolers' allocations in the dictator game: The role of moral emotions". Journal of Economic Psychology. 31 (1): 25–34. doi:10.1016/j.joep.2009.09.002.
  14. ^ Alevy, Jonathan E.; Jeffries, Francis L.; Lu, Yonggang (2014). "Gender- and frame-specific audience effects in dictator games" (PDF). Economics Letters. 122 (1): 50–54. doi:10.1016/j.econlet.2013.10.030. ISSN 0165-1765.
  15. ^ Zhang, Le; Ortmann, Andreas (2013). "The effects of the take-option in dictator-game experiments: a comment on Engel's (2011) meta-study". Experimental Economics. 17 (3): 414–420. doi:10.1007/s10683-013-9375-7. ISSN 1386-4157. S2CID 144098452.
  16. ^ a b Chowdhury, Subhasish M.; Jeon, Joo Young; Saha, Bibhas (2017). "Gender Differences in the Giving and Taking Variants of the Dictator Game" (PDF). Southern Economic Journal. 84 (2): 474–483. doi:10.1002/soej.12223. ISSN 0038-4038. S2CID 146250008.
  17. ^ Bhogal, M. S.; Galbraith, N.; Manktelow, K. (2016). "Physical Attractiveness and Altruism in Two Modified Dictator Games". Basic and Applied Social Psychology. 38 (4): 212–222. doi:10.1080/01973533.2016.1199382. hdl:2436/620176. S2CID 147949673.
  18. ^ Andreoni, James; Miller, John (2002-03-01). "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism". Econometrica. 70 (2): 737–753. CiteSeerX 10.1.1.165.3572. doi:10.1111/1468-0262.00302. ISSN 1468-0262.
  19. ^ Eckel, Catherine C.; Grossman, Philip J. (1996). "Altruism in Anonymous Dictator Games". Games and Economic Behavior. 16 (2). Rochester, NY: Social Science Research Network: 181–191. doi:10.1006/game.1996.0081. S2CID 58892684. SSRN 1883604.
  20. ^ Brañas-Garza, Pablo (2006-07-01). "Poverty in dictator games: Awakening solidarity". Journal of Economic Behavior & Organization. 60 (3): 306–320. CiteSeerX 10.1.1.378.4031. doi:10.1016/j.jebo.2004.10.005.
  21. ^ Fowler, James H.; Kam, Cindy D. (2007-08-01). "Beyond the Self: Social Identity, Altruism, and Political Participation". The Journal of Politics. 69 (3): 813–827. CiteSeerX 10.1.1.165.2498. doi:10.1111/j.1468-2508.2007.00577.x. ISSN 0022-3816. S2CID 12533668.
  22. ^ Fowler, James H. (2006-08-01). "Altruism and Turnout". The Journal of Politics. 68 (3): 674–683. doi:10.1111/j.1468-2508.2006.00453.x. ISSN 0022-3816. S2CID 2978329.
  23. ^ Leider, Stephen; Möbius, Markus M.; Rosenblat, Tanya; Do, Quoc-Anh (2009-11-01). "Directed Altruism and Enforced Reciprocity in Social Networks". The Quarterly Journal of Economics. 124 (4): 1815–1851. doi:10.1162/qjec.2009.124.4.1815. ISSN 0033-5533. S2CID 155012972.
  24. ^ Brañas-Garza, Pablo; Cobo-Reyes, Ramón; Espinosa, María Paz; Jiménez, Natalia; Kovářík, Jaromír; Ponti, Giovanni (2010-07-01). "Altruism and social integration". Games and Economic Behavior. 69 (2): 249–257. CiteSeerX 10.1.1.688.2490. doi:10.1016/j.geb.2009.10.014.
  25. ^ Exadaktylos, Filippos; Espín, Antonio M.; Brañas-Garza, Pablo (2013-02-14). "Experimental subjects are not different". Scientific Reports. 3: 1213. Bibcode:2013NatSR...3E1213E. doi:10.1038/srep01213. ISSN 2045-2322. PMC 3572448. PMID 23429162.
  26. ^ Cesarini, David; Dawes, Christopher T.; Johannesson, Magnus; Lichtenstein, Paul; Wallace, Björn (2009-01-01). "Genetic Variation in Preferences for Giving and Risk Taking". The Quarterly Journal of Economics. 124 (2): 809–842. CiteSeerX 10.1.1.638.3714. doi:10.1162/qjec.2009.124.2.809. JSTOR 40506244. S2CID 13867477.
  27. ^ Brañas-Garza, Pablo; Kovářík, Jaromír; Neyse, Levent (2013-04-10). "Second-to-Fourth Digit Ratio Has a Non-Monotonic Impact on Altruism". PLOS ONE. 8 (4): e60419. Bibcode:2013PLoSO...860419B. doi:10.1371/journal.pone.0060419. ISSN 1932-6203. PMC 3622687. PMID 23593214.
  28. ^ Hoffman, Elizabeth; McCabe, Kevin; Shachat, Keith; Smith, Vernon (1994-11-01). "Preferences, Property Rights, and Anonymity in Bargaining Games" (PDF). Games and Economic Behavior. 7 (3): 346–380. doi:10.1006/game.1994.1056. hdl:10535/5743.
  29. ^ Singh, Puranjaya (1997). Human Behavior in Dictator Games (PhD).
  30. ^ Thielmann, Isabel & Böhm, Robert & Ott, Marion & Hilbig, Benjamin. (2021). Economic Games: An Introduction and Guide for Research. Collabra Psychology. 7. 19004. 10.1525/collabra.19004.
  31. ^ Berg, J.; Dickhaut, J.; McCabe, K. (1995). “Trust, Reciprocity, and Social History”. Games and Economic Behavior. 10 (1): 122-142. doi:10.1006/game.1995.1027.
  32. ^ a b c d e Alos-Ferrer, C.; Farolfi, F. (2019). “Trust Games and Beyond”. Frontiers in Neuroscience. 13: 887. doi:10.3389/fnins.2019.00887
  33. ^ Cesarini, David; Christopher T. Dawes; James H. Fowler; Magnus Johannesson; Paul Lichtenstein; Björn Wallace (11 March 2008). "Heritability of cooperative behavior in the trust game". Proceedings of the National Academy of Sciences. 105 (10): 3721–3726. Bibcode:2008PNAS..105.3721C. doi:10.1073/pnas.0710069105. PMC 2268795. PMID 18316737.
  34. ^ a b c Bohnet, I.; Zeckhauser, R. (2004). “Trust, risk and betrayal”. J. Econ. Behav. Organ. 55: 467–484. doi:10.1016/j.jebo.2003.11.004

Further reading

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