1.7 Experiment
The Ultimatum Game: Are You Generous or Greedy?
Making connections between what you learn in the classroom and what you see in the real world can be hard. One of the best ways to learn about economics is to “get your hands dirty” by doing economics. This book contains sixteen games and experiments, including one in each microeconomics chapter. Most of those games and experiments place you and your classmates in a scenario where you have to make an important real-world decision. The outcome of each game or experiment depends on both your individual decision and that of your classmates. These games and experiments are designed to show you that social problems may arise when many individuals collectively behave in a certain way. You’ll also learn something about yourself and your decision-making process along the way.
Chapters 16–20 cover macroeconomic topics you hear about in the news: gross domestic product (GDP), growth, unemployment, and inflation. Each of those chapters ends with a Real-Time-Data Analysis Exercise that shows you how to locate, read, and interpret data about the economy.
Your instructor will provide you with detailed instructions for each game, and can also help you conduct a post-game analysis of the link between the game and the real world.
In this chapter, you learned that people respond to incentives. In this chapter’s game, you’ll have a chance to explore how your individual incentives can be shaped by the alternatives available to others.
Your instructor will randomly pair you with a classmate. The pairings will be anonymous; no player will know who his or her partner is.
One person in each pair will be designated as the “allocator.” The other will be designated as the “receiver.” You will get the chance to play both roles during today’s game.
At the beginning of the game, the allocator will receive $1,000. However, there is a condition: The allocator must offer some portion of those dollars to the receiver. The allocator may offer as little as $0 or as much as $1,000.
The receiver then has a chance to either accept or reject the allocator’s offer. If the offer is accepted, the receiver will receive the amount offered; the allocator will earn whatever is left over ($1,000 minus the amount offered). If the receiver rejects the allocator’s offer, neither player will receive anything.
Your instructor will outline the procedures for submitting offers.