Bestiary of Behavioral Economics/Dictator Game

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The Opening Position of the Dictator Game.
The Opening Position of the Dictator Game, 1st Player Wonders Amount to Give.

The Dictator Game is an economic game that is designed to question the standard economic assumption that individuals will act solely out of self-interest.[1] This is done by presenting real-life data of otherwise rational individuals acting in a manner that runs counter to the predictions of economic assumptions.[2]

Description[edit]

The Dictator Game typically consists of two individuals, one of whom is given some quantity of money. The second individual is given nothing. The participant given the money, known in the experiment as “the dictator,” is told that he must offer some amount of that money to the second participant, even if that amount is zero. Whatever amount the dictator offers to the second participant must be accepted. The second participant, should he find the amount unsatisfactory, cannot then punish the dictator in any way.[3]

The Predicted Outcome of the Dictator Game.
The Predicted Outcome of the Dictator Game, 1st Player Gives a Zero Amount.

Predicted Results[edit]

Standard economic theory assumes that all individuals act solely out of self-interest.[4] Under this assumption, the predicted result of the dictator game is that the “dictator should keep 100% of the cake, and give nothing to the other player.”[5] This effectively assigns the value of what the dictator shares with the second player to zero.

The Actual Outcome of the Dictator Game.
The Actual Outcome of the Dictator Game, 1st Player Gives a Non-Zero Amount.

Actual Results[edit]

The actual results of this game, however, differ sharply from the predicted results (though to varying degrees, depending on the exact setup of the game). With a “standard” dictator game setup, “only 40% of the experimental subjects playing the role of dictator keep the whole sum.”[6] The average amount given, under these standard conditions, is found by Forsythe et al. to be around 20% of the allocated money.[7] In any case, in the majority of these game trials the dictator assigns the second player a non-zero amount.

As the experiment parameters of the dictator game are altered, the actual results begin to vary widely, though they still do not conform to the results predicted by the assumption of self-interest. Under double blind conditions, where the isolation between the dictator and the second participant is maximized, a majority of dictators keep all the money and almost all dictators keep at least 80% of it.[8][9] To the opposite extreme, exists an experiment design by Mittone and Ploner, where both participants have previously taken a quiz in order to participate, but only the dictator is directly rewarded (by the initial allocation).[10] Under this design, “up to 80% of dictators” give some amount of money to the second player.[11] Again, as standard economic theory predicts no dictator will give anything to the second player, no matter how small, both these results remain problematic for the assumption of self-interested action.

Conclusions[edit]

The clearest conclusion to draw from the results of the dictator game is that there exists some motive for human actions other than self-interest.[12] Guala suggests two such alternative motives: people care for the welfare of others (altruism) or people are averse to particularly inequitable distributions (they desire fairness).[13] But, the extreme variability in the results of the dictator game, depending on minor variations in experimental setup, has made any conclusions about the results of the dictator game tenuous. Economists have simply been precluded “from giving a clear-cut interpretation of the [dictator game] data as either supporting or falsifying the standard theory.”[14]

Objections[edit]

Rather than give an explanation of the anomalous results of the dictator game that seeks to prove or disprove standard economic theory, the dictator game itself can be accused of being flawed. The idea is that, “The dictator game, on its own, is probably too unusual and too abstract to trigger any real-life normative behavior.”[15] Given the rather unrealistic nature of the game (there are few comparable real-life situations), the dictator game simply does not elicit a response from its participants based on a single social norm (whether that norm is rational selfishness or something else).[16] There is just no norm that has been developed to match a situation that is so unlikely to occur in reality. Knowing this, huge variability in results can be taken as a symptom of different social norms (each activated by various setups of the dictator game) determining results.[17] For example, in a dictator game experiment by Cherry et al., where only the dictator is made to take a quiz before he receives the initial money, there is a very low level of sharing of the allocated money by the dictator.[18] This setup is taken by Guala to elicit the social norm that one should be allowed to enjoy the fruits of one’s labor.[19] The dictator had to work to get his allocation, by taking a quiz, and therefore he likely feels he should not have to share his "earnings" with the second participant who did not take a quiz in order to play the game. As these explanations vary between game setups, it may be that the dictator game is just not detailed or realistic enough to make any direct conclusions about any norm, even rational self-interest, absent confounding explanations.

References[edit]

  1. Guala, Francesco, Luigi Mittone. “Paradigmatic experiments: The Dictator Game.” The Journal of Socio-Economics 39 (2010): 578, 578-584.
  2. Guala 578
  3. Hoffman, Elizabeth, Kevin McCabe, Vernon Smith. “RECIPROCITY IN ULTIMATUM AND DICTATOR GAMES: AN INTRODUCTION.” Handbook of Experimental Economics Results 1, (2008): 412, 411-416. DOI: 10.1016/S1574-0722(07)00046-7
  4. Guala 578
  5. Guala 578
  6. Guala 578
  7. Guala 579
  8. Hoffman 414
  9. Guala 579
  10. Guala 579
  11. Guala 579
  12. Guala 578
  13. Guala 579
  14. Guala 581
  15. Guala 584
  16. Guala 581
  17. Guala 581
  18. Guala 579,581
  19. Guala 581