Bitcoin Forum

I read this interesting experiment from The Origin of Wealth, a book by Eric B. Beinhocker (paraphrased):

Imagine that a stranger proposes you and me the following deal.  She will give us 5,000$ if we can agree on how to split it.  It works like this: I choose a split and you don't get to negotiate it, you can only accept the deal (in which case each of us gets what I chose) or reject it (in which case neither of us gets anything).

After giving it a short thought, I propose that I get 4,990$ and you get 10$.

Would you accept the deal?

(I'm not asking what you think is the rational thing to do from either a selfish or political standpoint, but what would you actually do.)

Well obviously I would. However you made a mistake, since the only nash equilibrium is 4999.99 (taking in account that the minimum value for a trade is 1 cent), in which case I still should accept the deal.

Spite the other guy for not being more "fair", or run with the 10 bucks and get 3 free tall no-whip mochas...

Does "Take the deal, but mug the guy as soon as he starts to walk away with his $4,990 gain" count as an option?

@vuce:  Your analysis is flawless, and settles the game-theoretic interpretation of the problem.  Then again, this question isn't a riddle in game theory, nor necessarily about maximizing payoff, nor are you asked to take money as a representation of utility.  I think you understand that and mean what you say, but just to make sure: would you really take one cent if this actually happened tomorrow?

No,  that is not an option. :)

Even a cent is better than nothing, especially when it comes to a bitcent.  I would.

Cheers,

I most definitely would. Not for the 1 cent I would get, but because I'm not a selfish bastard :) (not that all those who wouldn't are selfish bastards, I meant no offense to anyone :))

Nice.  There is really no "right" or "wrong" response, so please keep 'em coming.

I figure many forum users know about this experiment or can easily see what it tries to test.  For those not versed in game theory and up for a spoiler, Wikipedia has an article¹ that explains what this is about, and what results were obtained in different cultures.  But if you intend to reply please do so before reading that page.

I think it would be interesting to have a chat about some implications of this experiment, but I'd rather allow some time for replies first.

For whatever it's worth, and knowing full well it's not the "rational" thing to do, I know I'd tell the greedy bastard to go #%@! himself.

Two perhaps interesting questions:

If you were in the position of the one who made the offer, what would you offer:

 a) to someone who you expect to know about game theory and this game in particular,
 b) to someone who you expect not to know about game theory and this game in particular.

in either case, you know nothing else about this other person.  Not even sex, race, nationality, etc.  Imagine it happens in some anonymous chat room (not #bitcoin-otc :) ).

[1] http://en.wikipedia.org/wiki/Ultimatum_game

Reject. I would reject anything under half.

Half.


Half.

+1

If I got the 4,990$ offer I'd say "That wasn't very bright" and walk away

The same game can also be phrased like this: I get given 5000 $. You then get the option of making me return it again. How much must I offer you to not do that?

@vladimir: It's a one-off.

@vuce: So you would accept that the other guy keep $5000 and you $0?  Technically (and again, assuming we identify utility with monetary payoff, as you seem to have done), that is a Nash equilibrium too: rejecting the deal would hurt the other guy while netting you nothing.

@db: That would be the exact same deal, with a different framing.  My guess is that if you did a parallel study, dividing the subjects in two halves and asking either question, you'd get significantly different results.  Ironically, I think your framing favors the first guy.  Guess why?

no it's a one shot deal, which is why I think 50/50 is the only logical offer.

This is besides the question, but in game theoretical terms, an iterated version of the game would promote more equality.  If we're going to play repeatedly, I (proposer) know that you have a rational reason to veto an "unfair" proposal --that is, so I'll learn to be fairer next time.  So I'll probably offer a more equal split to begin with.

In a one-shot game, there is never any purely financial incentive to reject whatever offer.  As I said, not even a 5000$/0$ one.

Interesting question.  You should turn this thread into a poll.

I thought of a poll, but I'm more interested in the explanations than the breakdown.

Honnestly I could say no.  I don't give a crap about getting 10$ for free, and I would enjoy better punishing the other guy for being really too much greedy.

In this case im indiferent :)

To anyone saying 50:50: it's more important to you to "teach them a lesson" than 2499$?

If value of pride/satisfaction of rejecting subjectively "unfair" offer > amount offered, then I reject. If not, I accept. That's why there is no wrong answer and it's not irrational to reject any offer.

It's hilarious how pretty much everyone on here would take $10 for free in an isolated situation.  But the second you find out someone else gets $4990, you get upset.  Jealous much?

rationally, accepting the 10$ is the right choice in a totally isolated experiment. telling anyone that you would make a rational decision however, is not.
always appear like the 50/50 guy.
accepting 5000/0 is not rational btw. why would you care more about the greedy unknown person taking all the money than the unknown person offering it?

As you currently pose the scenario, I would derive more pleasure from watching the other person get nothing if they offered me less than somewhere around 40%. I expect exactly half but I will settle for slightly less in this case. My percentage changes depending on how much money is involved too. The lower the amount, the closer to exactly half I will demand. The higher the amount, the less I will demand. After all, 1% of a trillion dollars is still 10 billion dollars. I first heard this question posed at $100, in which case I want half or I can lose $50 to watch you do the same. If you are making the offer, it's wise to always offer half since that gives you the best chance to profit.

Anyone that says it's always rational to accept any offer is making the mistake of thinking that money is the only thing of human value. That's false. Money is a means to an end.


Yes, I would gladly spend $10 to watch a bastard squirm. Got a problem with that?

You derive more pleasure from watching other people suffer than getting something on your own?  I would get that envy checked out.

Thanks for your opinion, duly ignored.

If I offered you $10 for free, would you accept?  Or would you require my Income Tax return to make sure I don't have too much money and that's a "lowball" offer.

What you make on your own doesn't concern me. What we are both offered and you get to distribute is a different story. They are only analogous if all you look at is the money. I'm sorry you don't like my values but there's nothing objectively superior about yours. It's purely subjective.

You should accept $0.01 only if you value revenge less than that. I don't.

Essentially, it depends on your pride and your dollar value of spiting someone who insulted you.

The fact that people behave this way serves as an incentive for the person making the split to give you more than $.01.



I wouldn't accept less than $50.

This man gets it. Call him stubborn, stupid, vengeful, etc., but you can't say he's being irrational.

Not true. Many would pay a little to punish a jerk. 0$ sounds little enough for me. So does 10$. I don't know about $100. I'd go with the deal and mumble under my breath about jerks at $1000.

You weren't both offered anything.  You were offered $10.  It does not affect you one bit what someone else was offered or what they offered to pass down to you.  It only matters if you are envious and vindictive.

Sure, there is nothing objectively superior to it.  But I subjectively find "revenge" due to envy pretty despicable.

I'll ship you 20 bitcoins, you want them?

An interesting hypothetical to the spite-happy people.

My grandmother dies and leaves me $5000 inheritance.  You are my next-door neighbor.  You ask for some of the money.  I say "sure, I'm feeling nice here's $10".  Do you bash my $5000 car with a hammer because I didn't give you enough?

Also, there's actually a way to win as the receiver if there is communication.  If you can make a binding decision ahead of time, you could say "I will reject any offer less than $4990".  And if you violate that agreement, you are forced to donate twice the money you get to charity or something like that.  If my opponent is certain I will live up to my word, he'd be a fool to offer me anything less (unless he is the jealous spiteful type who will bash my car because I got an inheritance).  It's similar to playing chicken and removing your steering wheel and throwing it out the window and disconnecting the brakes.  Your opponent knows that you cannot possibly stop, so he has to either swerve or die.  You win every time your opponent does not disconnect his own brakes and steering wheel before you.

Here Eliezer Yudkowsky argues well that it can be a rational to actually be the 50/50 guy:

http://lesswrong.com/lw/to/the_truly_iterated_prisoners_dilemma/

It's harder to think of a scenario that is less analogous to the game than this one. You're missing the point entirely.

This is not the prisoners dilemma, since the only reason to defect is spite.

How is it different?  Because in one case there is a "rightful" owner, and the first case, the money appears to be "shared" at one point in time?

Well, I can't respond for anyone else. I can only give you my opinion and subjective values. And besides, this is somewhat of a red herring to the fact that rejecting an offer in the game is not irrational under any circumstances.

Anyways, I personally would find that:

1. You have a legal claim to the entirety of the funds
2. You are not obligated to make any offer to me
3. You are not receiving the funds under the condition that I accept a one-time offer that you are obligated to make

So no, I wouldn't personally smash your car. I would reject your $10 offer in the game. I'd find that the marginal utility of $10 to me financially is worth much less than the opportunity to give you a lesson that cooperation and negotiation is an important social skill.

Fair enough, but the result is still the same in both cases.

Do you feel like you were obligated to some amount out of the game?

No, but I value cooperation/fairness enough that I'd prefer teaching a lesson over $10. But like someone else said, offer me 1% of a trillion and I'll quickly change my tune.

Very precisely.  You think that shouldn't matter?

That is also why db's framing ("they give you 5000$ and I get to say how much you pay me to keep the rest") makes the problem subtly different, even though the underlying reward matrix remains identical in monetary terms.

I have insisted you don't necessarily treat this as a game theoretical abstract problem where utility is perfectly encoded in the monetary payoff and your job is just to maximize that.  That is, not unless that's honestly how you would frame it in real life.

The purpose of the thought experiment is exactly to explore how real human emotions and perceptions, and how real social dynamics, transform a problem which otherwise (that is, in an abstract game theoretical formulation) would have a clear unambiguous solution, invariant from all the different framings that maintain the same monetary reward structure.  That is, to explore the difference between rationality as formally defined in game theory and what makes sense to you in real life.

Whether you choose to call the latter "rational" or not is a matter of definitional nuance and not the main point.

Oh, I'm aware of human emotions being quite irrational (a lot of people would rather be the richest person in a very poor country than the poorest person in a very very very wealthy country, even if the poorest guy has a lot more stuff than the richest guy).  Envy is a huge human emotion.  I just find it to be a huge weakness and not a characteristic I admire at all.

It's all about how people want to punish the person offering the deal.  Why do they deserve punishment?  What are they doing unfairly?  What are you owed by them?  Who are they harming by offering you a low offer?

People hate when other people get something for free and they do not.  Therefore they'd actually pay a fine to make sure no one else got free stuff.  It's borderline sociopathic to me, but it's part of many peoples personality.

If I was playing this game as the person making the offer, I would do my best to try to determine what is the lowest payout my opponent would take.  Then I would try to figure out how certain I was at each level.  If I was 99% sure he would take an even split, and 80% sure he'd take 3000-2000, I'd go with the even split.  If I had to deal with this person again, I'd offer more than if I never saw him again.  If I was certain he was rational and not spiteful, I'd offer him a penny.  If I was receiving the bet, I would try to make sure the person negotiating thought I was as crazy as possible and that I was capable of spite.  Hell, I'd even try to convince him I wouldn't even take half.  I don't need the money that much, so it's not worth my trouble unless he gives me $4k.  Then I'd accept any offer he throws my way.  But I would definitely not let him know that while the game is being played.

But the idea that someone wants to take away a huge sum of money from someone else just because they didn't give you enough seems almost mentally ill to me.  Any amount over a trivial sum would be considered a gift and insurance that his opponent is not a fool.

Any definition of rationality that only takes into account monetary incentives is completely flawed. Money is a means to some further ends, something that will satisfy some other human desire. If you're poor and starving, I'd imagine you would take any amount because you value your next meal over any chance to exact vengeance. On the other hand, if you have everything in the world, what's $10 over the chance to share your views on cooperation/vengeance with someone that just seemingly slighted you? The psychological satisfaction that results would be worth more than another $10 in your pocket.

I find spite to be irrational.  And I certainly wouldn't spend $10 to teach a lesson to some random stranger.

Getting satisfaction out of harming others is for sociopaths.

Show me how it's irrational to reject an offer. Is it irrational to pay to go to Disney world? It causes a loss in financial standing to only satisfy some psychological need. What's the difference?

Without trying to be too morbid, if a psychopath murdered your entire family, then played this game with you, and offered you $1. You would accept it?

I'm saying getting enjoyment out of harming others is disgusting, not irrational.

In that case, vengeance is at least deserved.  Someone not giving you something you have no claim to is not.

If you can make such a binding decision you are effectively reversing the roles.  You are now the one calling the quantity and the other guy is the one that only gets to accept or veto.  From your perspective, you are not playing, and therefore not winning, the original game.

In the problem as formulated, you cannot make such a binding decision.

Now, imagine you could make a non-binding declaration of how much you will accept, and that the other guy offers you $10 nevertheless.  Does that change your choice?

If I never see the guy again, never play the game again (basically the problem postulated), I take any offer.  But I absolutely don't let him know that ahead of time.  Even if he gives me $0, I'll let him have all $5000.  Unless that money came from a charity to feed orphans or something.

Good point. This game is designed so that the people discussing it will have a tendancy to lie about how they would really act: Potential players discussing the game are incentivized to provide the appearance that they would deny small values of money, but are incentivized to accept all values of money when they are actually in the situation.

And you do whatever you can to convince him.  Perhaps if he seems like he has a high sense of fairness.  You could appeal saying "come on, we should split it half way, I'd do the same for you".  If he seems weak or desperate, tell him you don't care that much, and burn a $100 bill in front of him to show him how much you don't care.  It's all negotiating techniques and reading people at that point.

I think the most believable situation without pissing off the person making the deal is to start out at 50-50.  If you try to demand more, he may just spite you.  If he mentions A Beautiful Mind or Nash, I start making him think I'm irrational.  How the second guy reacts to the offer is the least interesting part to me.  Either you are rational or spiteful.  What the first guy offers, and what the second guy tries to get is much more interesting.

You can play all sort of mind games to make her believe that you won't take an "unfair" offer, but the formulation states that she'll offer you $10 nevertheless.  Your option (or not) to communicate before she makes her call only matters as far as that would affect your decision.

I mean, would you accept more or less money if you had a chance to state your position first?  If you swore you wouldn't take anything but half and she offered $10, would you be any more or less likely to accept it, in relation to the case where you didn't get a chance to talk before her offer?

If not, then all this talk about mind games is irrelevant to the question, isn't it?

I understand that some game theory uses this definition of rationality, but I find it to be a misnomer. It's really just financial optimization. If a psychological need is valued more than a fixed monetary amount, it's not illogical to prefer the psychological satisfaction. Otherwise, paying to ride a rollercoaster is irrational. Or paying to give medical treatment to a loved one is irrational. Or willing to pay a lawyer more in legal fees than will be recouped in a tort case, in order to satisfy a sense of fairness, is irrational.

It's irrelevant if you are dealing with robots or people who aren't spiteful.

But some people would actually kick themselves in the nuts just to watch you get hit by a truck.  People do it all the time.  Just pay attention to politics.  A huge segment of the population is motivated by spite, envy, and jealousy, and would make themselves suffer as long as people they consider undeserving suffer more.  It's quite sick.

What if you consider that the utility measure already accounts for all these psychological factors?  So the numbers in the matrix don't represent raw dollars,  but an accurate estimation¹ of how happy would it make you, in relative terms, to pick that option, all things considered.  Then rationality is accurate enough a name for optimization of that, isn't it?

That is formally equivalent to calling the utility money and assuming (again, for the sake of mathematical simplification) that that is all you care about.

1: Don't ask me how would you go about attributing a scalar value to the hairy mess of actual human preferences and biases, though.  Game theory doesn't even try to do this.

Formally, this assumes that first you try to maximize your own payoff, and that being equal, you try to maximize global utility.

It can be argued that the "unknown person offering" the money has signaled a lower preference for keeping it than the "greedy unknown person" taking it.

This is a minor point, though, and somewhat besides the question.  Just got curious about whether the folks that would take one cent would go all the way to accepting nothing at all.

Most economists retreat away from basing measurements on cardinal utility, instead opting for ordinal utility. That being said, assuming (very big assumption) that you could accurately measure cardinal utility (assuming this existed) of all potential choices, and prove that an agent (person) chose an outcome that was suboptimal in utility, then you have to essentially explore the possibility that human action lacks an element of free will. Or redefine the idea of preferences.

It really depends where the money is coming from.  If it's wealth that's just created (a $5000 car drops out of the sky) from thin air, it makes sense to create it (unless you sold used cars or something silly where you would personally be hurt).  If it was transfered from one random person to another, and the person transferring it was voluntarily giving it up, then it doesn't matter either way which way you act.

I love how everyone is adding new rules and justifications.
if it's a full moon and the other guy is under 30 and I'm wearing pants and it's a weekday and I can negotiate the price and Muslims bomb the royal wedding and China goes on the gold standard and David letterman retires and the money wasn't stolen and it would be used to open a soup kitchen for stray cats,  I'll undoubtedly, probably, almost, conditionally take the money. Unless Bono clubs starving children in Africa for a benefit concert or Porsche builds a new car that isn't a 911 or I didn't have my 20 daily cups of coffee or the guy with the money falls under a bus and we have to have a knife fight to the death (which I never win on the first try anyway) or fukushima finally melts down properly, I mean shit or get off the pot already. how long will they keep propping those cores up like the US economy.

This isn't that complicated. The other guy is trying to buy $4990 for $10. that's just a bad deal.

You are trying to burn $4990 in someone else's wallet for $10.  Who is making the bad deal again?

I don't agree that rejecting the $10 deal can be characterized as an act of jealousy or envy.  Let me illustrate with a few examples less loaded than the grandma heritage one.

Variant 1:

Imagine that the mysterious stranger came with the following proposal instead:  "I have $5000 to give you two guys, and I will split it randomly.  You don't get to further negotiate your shares, only take it or leave it.  If both accept, you get your share.  If either rejects, neither gets money."  Seeing that your expected outcome is $2500 and you have nothing to lose, you both immediately accept.  You get to confirm that the randomization method (die rolls, roulette, computer PRN generator, whatever) is fair.

So, you both cross your fingers and hope for the best.  Unfortunately for you, the dice give $10 to you and $4990 to the other guy.  Uncomfortably concealing his mix of joy and worry, the other guy accepts his $4990.  What do you do?

Variant 2:

The mysterious stranger proposes: "I'm feeling generous and I'd like to give away $5,000.  But honestly, I like you [smiles and taps the other guy in the shoulder] better, so have $4,990$.  I hope you [looks at you as if counting the nanoseconds to take his eyes elsewhere] don't mind you get $10.  You don't get to negotiate, just say yes or no, now.  If either of you rejects the offer nobody gets a dollar."

What would you do?

Note that I'm not saying that the above reformulations are equivalent to the original one.  They're equivalent in the game theoretical sense, but very different psychologically.  Actually, I'm using tomcollings's technique here to argue the opposite point.  I would have a different response to these reformulations (and to the ones advanced by tomcollings) than I would have to the original one.  But I argue that's not because I'm inconsistent or hypocritical, but because there are legitimate reasons why the differences in framing matter.

@deadlizard: the original "game" is simple in its terms, and for every one person answering, the reply is simple and even obvious.  But the psychological and social implications are varied and complex, as the variety of responses, and reactions to responses, attests.  The little variations on the game help analyze our motivations and explore that psychological space.

For example, my latest reformulations try to prove that what drives most of us who would reject the original deal is not envy of jealousy, on the basis that most of us would respond differently to the modified games.

All human emotions are nonrational, not irrational. If I tried to spite you by burning my house down and leaving yours completely unharmed, that would be irrational. Anyways, the difference between outright charity and taking advantage of a position of power has been explained to you. I'm sorry if you can't/won't see it.

V1- I take any offer.

V2 - I take any offer.

I'd guess some people reject the offer even though it hurts an innocent guy and benefits the guy who is "unfair".

What's wrong with taking advantage of a position of power so long as you are not harming someone?  If you are playing poker and get AA, do you fold because you might be taking advantage of your position of power?

This game is similar to the Cold War nuclear standoff between the USA and the USSR. Let's say that country A detects that Country B has launched 500 nuclear missiles. Should Country A fire back? What's the point? Country A will still be completely destroyed. Launching a counterattack won't help the situation.

However, it is in each country's interest to make the other country think they will fire back in this situation, to deter the first strike. It is in each country's interest to appear irrational.

Firing back is neutral if anything, but it's a good example.  Obviously real world examples are a bit flawed since even a nuclear attack would not destroy everything, some people would live, etc...

Even so, firing back and killing a lot of innocent people just because they have asshole leaders is pretty disgusting.

Who said anything about it being wrong? I said there's a difference between that and charity. You do understand the difference, right?

Why is him giving you anything beyond the first penny (or whatever significant amount of money to move you from neutral to taking action) any more than charity?  It's not your money, is it?

Put it another way.  If I end up with a package of $100 on my door, I am happy.  But some people, if they find out their neighbors got $1000, are no longer happy about it.

I, who would reject the offer in the original formulation, would take these offers.

Perhaps.  Then you can call them envious and jealous, respectively.  It's less plausible, though, that the people who, like me, reject the original offer but accept these reformulations, are acting out of envy or jealousy, since if I was envious I would not accept either V1 or V2, and if I was jealous I wouldn't accept V2.

It's our money, if and only if we can settle on how to distribute it.

@tomcollins: It's not his money either.  The person who originally had it (let's call him the Faucet, for agility, and similarly call the other guy the Splitter and you the Boolean, since you only get to say yes or no) asked you to "split" it somehow.

Somehow you seem to imply that by putting the Splitter in the favorable side of a Nash Equilibrium, the Faucet has effectively given him the whole $5,000, so all that is left for you is to try and extort all you can from him, from a position of no legitimacy and hardly any force.  That is the game theoretical, abstractly "rational" framing, the one that ignores all human emotion and common sense conventions about fairness.  Very few people in the world would have seen it this way in pre-Nash times.

As we know, there are emotions and instincts at play.  Issues of self-image.  Empathy.  Perhaps genetically or culturally inherited notions and heuristics regarding property and fairness.  I can fight those notions, try to abstract away my own human nature, in pursuit of a rational ideal.  That, even to the extent we assume it's possible, doesn't come without a cost.  Those factors modify the real payoff matrix.  It's not purely about money.  Not even for those who act like it was (more on this later).

And what is my motivation to fight my own instincts?  The payoff I get for that effort is warping the game so I'm at the extreme sucker end.  Is that rational?

Repressing or overcoming emotion is often a requisite of rationality.  But that doesn't mean it is, in itself, automatically a rational thing to do.  For that, a benefit needs to be derived.

I argue that people who opt for --let's call it-- the Nash strategy do that self-restraint work in order to defend a self-image as "rational" beings, for a culturally established notion of rationality.  Nothing wrong with that, but it's a tradeoff, not inherently *the* rational thing to do.

Because it gets recursive and messy.  Once you convince yourself that going against primal emotions is the "good" thing to do, and if you manage to hide the costs under the carpet, then you won't feel as much of a sucker, so it will really "cost" less to you.  For example, by convincing yourself that the Splitter is not being a selfish greedy pig, you may actually dampen the primal outrage of being abused, and by doing that you may be justifying a greedy Splitter position.

This recursiveness means that beliefs on the game may be self-realising.

tl;dr:  Emotions alter not only what seems rational, but what is rational.  Beliefs about rationality, in turn, alter emotions, and thus, recursively, what is rational.  Any attempt at rationalizing the game transforms it, in some sort of Heisenberg uncertainty principle.  So a static game theoretical analysis that conflates money with utility doesn't settle the debate of what is rational.  

tl;dr's tl;dr: For all practical purposes, there is no rational answer.  What's right for you depends on your personality and cultural baggage.

But it's not your money.  The only money that's yours is what is offered to you, if you so accept.

That's pretty much exactly the question.  It is his to divide.  That's directly stated in the OP.


There's a rational answer if you can calculate utility.  But either way, getting upset at someone over this is silly.  Actually causing yourself harm to get back at them, for something so silly is quite telling about one's character.  It shows extreme weakness in your character.

Of course it's not my money. It's our money, if and only if we can settle on how to distribute it. I think I just said that. Of course, it's not your money either. You're mistakenly considering that the money is already yours but if it were then you wouldn't need me to approve of the distribution. You could keep it no matter what. That's not the case. Therefore, it's not charity on your part anymore than it's charity on my part.

Read the first post again.


Emphasis mine. Until we agree on how to split it up, the money still belongs to her. You're wrong. Just admit it so we can get on with our lives.

Your being plural.  Our = your for the sake of discussion.  It's not anyone's money until it gets agreed upon.

I think that's why you are looking at this incorrectly.  If he gets to decide how much you get, clearly it's not even a share of your money.  You cannot possess something you don't possess.

Wrong again. I get to decide how much the other person gets, nothing or whatever they suggested. They are merely narrowing down the options. I'm the one that makes the actual decision.

He gets to propose a split, and you get the final say.  That doesn't make the money his.  Until the game is concluded, the money remains the Faucet's property, and neither of you have any a priori claim on it.

That's a tautology.  Do you mean that only money needs be taken into account in order to calculate utility?

There is a strong hardwired social expectation for a fair (and I won't even use quotes here) split, and there is an emotional cost in overriding that.  You can decide it's worth it, but if you just ignore this cost, you are, by definition, not being rational.  And once you start factoring any non-monetary factors, the $0.01 vs $4,999.99 Nash equilibrium breaks down.

If you go to the wikipedia page for the Ultimatum Game you'll see that across cultures, almost everyone will reject any offer below some 20%-30%.  So, you see, the vast majority of humanity is very "weak" of character.

This and other experiments suggests that we are hardwired to tend towards collaboration and towards punishing defectors, because it has proven evolutionarily stable.

In a real world where almost nobody will take less than 20%, is asking for $4,999 rational?

In the extreme case you were presented before, after the Splitter has killed your family, would you still accept his $10 vs $4,990?  What do you mean he "deserves" revenge?  That's not any more Nash-rational.  What does the killing of your family have to do with the deal, at all?  Is there something wrong with your character?

I think we should all quit making this personal. It's a sign of weak character. (irony)

You are right that the majority of humans are weak.  That's why we have the problems we do.  It's the few strong that carry the weak.  

Taking someone who has actually wronged me is much different of a case.  What morally wrong act has the splitter committed in the original case?

The optimal play and the "rational" play are two different things.  I've already stated that I would be very unlikely to offer a low offer to my opponent, mainly because I figure he'll be an idiot and overvalue spite.

The interesting thing is, the natural reaction of people is fairly consistent with how one would act in real life, where you don't interact with people just once, there are repetitions to the game, and your reputation travels with you.  Our minds have evolved to play the game of life fairly well without actually thinking about it, which is why most people make a lot of fundamental mistakes for toy problems.

What about denying them something they have no claim to?  Why is their claim anymore legitimate than the second person?  The Game Owner gives the $5000 to both the people, but gives one of them the decision of distribution and the other a veto over the whole decision.  Neither has any "claim" on it or they both do.

Another interesting thing to think about is I am almost positive you could game the results by playing the same game but worded differently.

You go to a study.  They pick one person at random who has won a $5000 jackpot.  Let them get excited about it.  But then they draw a second person and say "this person is allowed to take as much of your jackpot as they want.  You can choose to accept what is left (and let the "stealer" keep what he took), or you can give all the money back.  You also can try to convince them to not take much."  I'd bet that the person choosing to accept or decline the amount would even reject a 50-50 split fairly often.  Even in the cases where he accepts the offer, he'd probably hold more animosity to the "stealer" than the first one.  He'd probably be mad at him when he takes half, but in the negotiating version, he'd be very happy to get half (or at least be neutral).

In a second version, you play the same game, except the second person "wins" the lottery.  He is allowed to give you some of the money.  If you choose to not accept what he gives you, he loses his prize.  In this game, I would expect small offers to be accepted much more easily and happily.  It wasn't your money to begin with, and he's just giving you some out of kindness and to ensure you don't screw him.  You won't be as mad at him for giving you a low amount since you weren't expecting any.

But in all 3 cases, it's the exact same game, all the rules are the same, it's just how the situation is presented is different.  You'd get widely differing results.  This is because people are absolutely terrible about logically thinking about situations.  They are very much emotion driven.  I find that to be a huge weakness.  It happens to be right in a lot of cases, and a lot of people are just not capable of logical thought processes, so it's better to have a compass that happens to point in the right direction even if you can't find north on your own.  It's a small minority of people who are capable of dissecting situations, actually stepping away from the problem, breaking it down, and figuring out their best course of action.  Another reason why democracy is awful.

That's the deal.  There's no such thing as "giving $5000 to both people".  It doesn't exist.  It can't exist in that situation.  If he gave me the money, it's mine and I walk away with it.  But I can't.  But he set up a game, where I *could* get $5000.  As the second person, the money does not even become remotely mine until the offer is made.  It is only at that instant that the money becomes mine.  I can take it, or leave it.  Before that was just an illusion that it was mine.  No different than the money that a Nigerian Prince promises me.

Are you saying that you would react exactly the same in the two different scenarios?

That you feel there would be a difference in the reactions of others makes me believe that you would react differently as well, but you consider yourself to be more rational (for some - your - definition of rational) than others.

As the first person, the money isn't even remotely yours until the second person accepts the offer, of which there is no guarantee. You've clearly already made up your mind and are now grasping at straws to justify your conclusion. Rational thinking is more effective when the conclusion comes at the end of debate, rather than at the beginning.

Gut instinct would of course kick in.  I might be more likely to view something as unfair.  But when rubber meets the road, I'm not turning down free money to screw someone over.

There's a difference between having emotions and being ruled by emotions.  I absolutely am better at removing my emotions from the equation than most people (50%+ of people are women).  Even a vast majority of people.

You are correct.  It's not yours until then.  There are no straws to be grasped at.  We are only talking about my actions as the second person.  As the first person, you need to play psychologically, not logically.

I can see the logic in accepting the deal (even if you thought you "deserved" more), because free money is free money.  But out of curiosity, how far would you personally extend that?  If you were offered only $0.01, would you still take the deal?  One cent is not really going to benefit you at all. What about $0?  You would not gain anything, but would you still let them have all the money? 

[Emphasis mine]
Your terminology suggests you're seeing this as a game that you play to maximize your score.  The very title of the thread supports that framing.  If that was in the "social contract" of the interaction (as it is in a game of poker) then going cutthroat would be protected from social stigmas by the "magic circle" of the game (just like in poker you can deceive and bluff, in Diplomacy you can stab, or in boxing you can punch, with ideally no hard feelings).  I was intending this more as a metaphor for social interactions in the wild.

Both players have equal claim (or lack thereof) on the money.  There's no moral basis for anything but an even split, which is just a sane and socially ingrained default.  As he deviates from an even split, the splitter not only gets utility at the boolean's expense, but he causes more harm than value he gets (because of the added grief of abuse).  By increasing the risk of a veto, this disequilibrium further reduces the global expected value.

You may contest that there are "irrational" forces at play here, like the expectation of an equal return as the basis of what is "fair" in absence of other claims, and the drive to punish exploitive behavior.  The conviction with which you call these irrational and idiotic suggests that you hold a reductionistic belief that game theory is straightforwardly applicable to (even stylized) real life interactions, despite assumptions like unbounded "rationality" on all parts, perfect information, perfect selfishness of actors, constrained time domain, isolated strategy space.

Don't you acknowledge the possibility that these "irrational" assumptions and biases may be evolutionarily stable, advantageous features for individuals and societies?

You do acknowledge that if you were the splitter, you'd be more generous than you think you "should", in anticipation for "idiocy".  Of course, it's the prevalence of such actual "idiocy" that makes it a credible threat.  And that, in turn, gets "idiots" a better payoff in this game.  So isn't this "smart", in a way?

It partially comes down to how the money is generated.  If it's cash,  it's not created out of thin air (unless Ben Bernake is in charge of the experiment).  If it was created out of thin air, it's stealing from everyone who has cash, including myself, so I reject it.  If it's actual wealth that's created out of thin air, I accept it, since it's better that someone has it than no one.  There are a ton of other variables, if I didn't like the guy for whatever reason, maybe I reject it (I'll spite someone for a penny, who hasn't thrown a penny at someone to screw with them?).  If the money would have been donated to charity, maybe I reject a quite high offer, even $500, since I'd pay $500 to have $5000 donated to charity.

A penny is pretty close to nothing.  I don't value pennies much.  I won't pick them up, I'll just throw them at things for target practice while I'm bored.  But any offer that would be an amount I'd pick up off the ground would be an instant accept.  Exceptions would be if the other person is someone I *really* wouldn't want to have the money.  For example, if someone was going to go out and get drunk then drive home because of getting the money.  There might be a price I'd pay to prevent that.  But it's surprisingly a low one.  If it were someone truly despicable, such as a murderer, a child rapist, etc..., I might sacrifice something myself to punish them.  But I certainly wouldn't sacrifice just because someone is a good game player.  So a dollar, I take in all but the most extreme cases.

I use the word "play" in many contexts.  Do not read into it as just a game.


There's no moral basis for an even split either.  It just appears that way since the question is worded as an equal claim.  But there is not an equal claim, as both players have different rules they must follow.  If they were just told to take the money from a pile, and if they both could reject back and forth until they both agreed, and there was parity, it could be said they have equal claim.  But the rules specifically make it so they are unequal participants.

I pretty much already stated your last point, that this game is a very special case and not something likely to happen in normal life.  In normal life, especially during most of human evolution, people interacted with small groups on a repeated basis.  Reputation was (and still is), a HUGE part of life.  If someone is seen as generous, he will get more generosity from his neighbors.  Those who follow through with generosity will get even more in return.  By having that as the "default" interaction people have, it allowed people to trust each other, become more successful, and grow society.  If you played this game in multiple rounds, you would see a much more fair outcome go forward.  Punishing someone is not just spiteful, but a teaching lesson where you actually have the chance to benefit.  If I punish someone by giving me a small reward, next time, they may give me a bigger amount.  The game shifts more toward the person who stops things, who will play hardball more initially.  Early rounds he may even reject fair offers to try to show he means business, and then the first person will give up and start offering very large amounts.  Depending on how many rounds there are, the first person may choose to play hardball back, and refuse to offer anything too much.  Eventually it will swing to 50-50, which is what you'd expect in normal human interactions.

The key here is the situation deviates from typical human interactions and situations.  The trouble is, normal everyday life now is considerably different than it was 20,000 years ago.  But we haven't really evolved,  We're still the same hairless apes of 100,000 years ago.  To get beyond that, we need to use our brains instead of our emotions.  It was the few people who actually are capable and actually chose to use their brain that are the reason we are arguing on the internet instead of sitting in caves picking bugs out of each others heads.  It certainly wasn't the emotional reactions that got us past that point.

The positions of the splitter and boolean are asymmetric.  That doesn't imply that their moral claims on the money need be different.  It's "free money" for both, zero versus zero claim.  Zero equals zero.

On what basis do you assume that you can derive moral claims from expected outcome in an idealized, partial, and demonstrably unrealistic model of the conflict?

You lament that our wetware is obsolete and that we don't do our best to conform to an abstract, reductionist, disembodied model of rationality.  Well, we are what we are!  And the very concepts of utility and value, that are at the center of mathematical models of rationality, ultimately derive from the obsolete craves and ambitions you despise.  

What's the point of sex, 99% of the time?  What's the point of art?  Of anything, really?  You can tell yourself any story about what you want in life, you can build an intricate symbolic structure representing a rationalization about why you even bother waking up in the morning.  No matter how high and imposing the towers, that castle will ultimately rest on your mostly obsolete emotions.

Rationality helped a fair bit bring us away from the caves, but what ultimately took us from there, and what made that an improvement, were the same ultimately pointless craves and ambitions that got us in there in the first place.

So I repeat: overriding our emotions is often a requisite of rationality.  But ignoring our emotions is not automatically rational.  There must be some worthy reward, current or expected, to warrant the sacrifice.

Even if it's just "practicing restraint for when I need it."

In your case (and sorry for gratuitous speculation, but even if I'm wrong this illustrates my reasoning), accepting the $0.01 allows you to conform to a respected model of rationality and thus tell yourself, and signal to others, that you are above most of the hairless monkeys.  Bet that feels good, doesn't it?  This could be traced back to various sorts of primitive psychosocial mechanisms (self-image, self-esteem, dominance, status, ...).

In my case, $0.01 or $10 are not nearly worth the outrage of being abused.  The delta between that suffering and the satisfaction of giving greedy pig Splitter the finger is worth more than that.  Other people pay comparable amounts to get a movie or book and experience a weak version of similar emotions by proxy.  Who are you to tell me that my action is irrational?

And immoral?  My choice passes most sniff tests: Golden Rule, check.  "Think global, act local", sure.  I wouldn't mind if everyone did as me.

For me it is 10%.  I would need at least 10% of the money to take the offer.  I would offer a 50/50 split myself if I had done absolutely nothing and the money was free and clear. 

You don't understand the difference between enjoying something and making an incorrectly being able to analyze what you would enjoy more?

Accepting $.01 in a situation with a stranger I'll never see again, who cares what he thinks?  I'm not trying to impress him or anyone else.

Who is being abused again?  You are only letting yourself think you are being abused.  You were tricked into thinking that you are getting a raw deal.  The same reason why my other two situations, you might think you are being abused even more, or not abused at all, just because someone worded it slightly different.

If I offered you 1% of $100 million, you'd decline?

slow clap....

No, for $5000 I would decline 1%.  It is irrational but I would do it. 

For $100 million I would take 1%. 

I don't understand.  Guess something got lost in editing here.  Could you please complete or rephrase this?

I claim that those other two situations are actually different, and the fact that they reduce to the same mathematical model only attests to the insufficiency of the model for these applications.  The anchor you establish with the initial claims makes it a morally different situation.

You may go to further extremes: imagine that I sue you for bogus claims but you can't afford a proper defense.  I offer to settle for all your stuff minus one dollar.  You can refuse, but let's imagine that the legal system in your country is broken enough that in that case you lose *all* of your money to legal expenses.  If we stick to money, the Nash equilibrium is the same.  Is this the same situation, only camouflaged to trick you into feeling more ripped off?  Would you still give me all the money but one dollar?

Tom, I gotta say a big thank you.

I've read the entire thread now and you've pretty much typed out and submitted my views accurately.

The only other thing I can see influencing my decision is what effort would be involved in actually getting the money (eg. If I were offered $0.10, would I have to take that as a little metal coin and go deposit it into my bank?).

If it was purely electronic with no inconvenience caused to me, I'd take any offer.

The problem with long threads is that it takes too long to read them, and I haven't done so.  However, this is an interesting topic.

Personally, I would offer 50/50 to someone whether they knew about game theory or not.

And, because of knowing game theory, I would refuse any offer of less than 50% under most circumstances.

The reason is simple:  taking a less-than-50% offer is only optimal with respect to the monetary variable in the question.  With respect to the social variable, there's nothing to be gained by making anti-social people wealthy.  And I have no reason to believe that me gaining 2499 bucks or less would outweigh the value, with respect to society at large, of sending a clear message to this person.

The reason for the "most circumstances" variable is that the social variable could be modified in other ways.  I just assumed for the sake of simplification that I am playing the game with a complete stranger whose identity I don't know.  And yes, the answer to this question does become very complicated if the amount to be split were more like 5 million.  I would then have to do a much more complex cost-benefit analysis over the social variable.

tl;dr version

When deciding whether to take the deal or not, i would weightt my gains in absolute terms (ignoring the total amount that got splitted) versus how much my decision would teach the other guy to be a better person; if what i would be paid was a big amount, even if it was just a small percentage of the even greater amount that got splitted, i would be more inclined to overlook the unfairness of the split, but if i would only get paid a more insignificant amount, i would be more inclined to not take the deal to teach the other guy to not be so selfish; but on the other hand if the amount the other guy gets even after giving me only a small fraction is already insignificant, rejecting the deal wouldn't teach much, and even a small amount of free money is already better than no money at all, so in such circunstances i would be more inclined to take the deal anyway.

And being an "idiot" this player will come out way, way better off than otherwise. Doesn't sound very idiotic to me.

Heh-heh-heh. You're funny...but don't worry, looks aren't everything.   ;)

Invite everybody involved in the game to pray together and to let themselves be filled with the Holy Spirit for guidance on who should leave with the money or if it should all be donated to a worthy charity?

Damn, Estevo.  I wish you lived in my town.  I would buy you a beer at the pub and we would talk for hours.  :)

So you are saying that you would turn down free money to spite someone if the price was low enough or the situation was just right?  That doesn't make you any better than the rest of us, you just have a different set of preferences.  If I give up $50 to "spite" Splitter (or "teach him a lesson"), then you say I am irrational or an ape ruled by emotions, but you would do it if the situation warranted it (in your opinion) or the price was sufficiently low.  It's the same behavior simply shifted by your specific morals, ethics, utility values and preferences.

It is impossible for a person to 'override emotion.' No decision can ever be made without emotion, you can only substitute one emotion for another. In this case, you can choose between the good feelings you get from receiving the most money for the good feelings you get for protecting your pride.

Nothing to be gained... EXCEPT $2499.

Any idiot chooser would never come out ahead.  He'll reject some offers.  Only if the negotiator knows this is he in trouble.


Of course, having an idiot negotiator or coming across as someone who won't accept a low deal would have you come out ahead as well.

No, I'm saying if there is no cost borne and it was just a transfer from one person to another.  For example, if I like Person A more than Person B, I might let Person A keep their money if the money was insignificant to me.

If $50 means nothing to you (you would not care if I just shipped you $50 for fun), then sure, it's perfectly fine.  I highly doubt you would reject $50, but some people certainly would.  There are some rich people who would turn down a lot.

I would accept your offer for $10, estevo.

I find the phrasing of the problem interesting. "She will give us $5000" is very important. Before hearing the rest of the problem, I'm inclined to feel like I'm about to receive $2500. When it turns out that I stand to receive $10 at the most, my immediate reaction is to feel cheated and insulted. I think this is a very irrational, but understandably human reaction. However, this is only because of an artificial feeling of entitlement. I didn't do anything to deserve any of that money, so why should I be upset?

In the end I think I'd realize that $10 can buy a 6 pack of good beer and that that's better than nothing.

Lesser amounts might change my decision, however. My rejection wouldn't necessarily be out of spite (which has been discussed here already), but because smaller amounts of money can't buy me much. For instance, $1 doesn't even get me a gallon of gas -- it's a waste of time for me to stand around talking with strangers for so little.

In the end, I think it just comes down to answering, "How much is $10 worth to you?". As an American with Australian roots, I tend to value money in relation to gas (USA) and beer (Australia). $10 can get me a useful amount of either  ;D

Ten dollars is such a negligible amount. I would get more value from watching the man suffer from his gamble.

What if you didn't get to watch him suffer?

Why does making him suffer bring you joy?

Do you enjoy watching teenagers beat homeless men as well to watch them suffer?

Well, just knowing he didn't get $4,990 for being a moron is value enough. Somehow this may encourage similar incidents to have a different fate.

The fact is $10 means nothing to me and I don't like morons polluting the gene pool with negligent prosperity.

Why is he a moron?  What would make him not a moron?

He's a moron in not acting in his own rational self-interest. He denied himself the prize money by making an irrational offer. The optimal solution would be giving me an actual incentive to say yes. You know, by me actually gaining $100 or so.

You've just plucked out another arbitrary figure.

So by your standards if I offer $99.99 I'm a moron, but if I offer $100.01 I'm a nice guy.

It's not arbitrary. It's very relevant if I am involved in the game. The number is what I would consider value. It's subjective by its very nature, a moot point.
 

How is he to know how to value your spitefulness and joy in seeing others you deem morons suffer?  Is he the same moron if he offers me $10 and I accept?  What if you change your break point to $2000, is he a moron if he offers $1999?

How is he to know how to value your spitefulness and joy in seeing others you deem morons suffer?

Libelous.

Is he the same moron if he offers me $10 and I accept?

A fortunate moron.

What if you change your break point to $2000, is he a moron if he offers $1999?

No, he's a moron if he makes an irrational offer that grants a high possibility of me not accepting the offer. Let's not be pedantic with the numbers.

So how do you define an irrational offer?  If he's going against someone who he is virtually certain will reject anything less than $3000, and he offers $2500, is he a moron?  Assume he values $2000 more than spite.

So how do you define an irrational offer?

One that a common man is likely to refuse.

If he's going against someone who he is virtually certain will reject anything less than $3000, and he offers $2500, is he a moron?

Yes.

Your definitions of "rational" and "self-interest" are questionable.

If someone was offered $10 for doing nothing, it would be irrational and not in his own interest to reject the offer (unless accepting the money would somehow be a burden on him).

Taking $10 is a direct benefit to you -- it's greedy, in a sense. Rejecting $10 is only in your self-interest if the pleasure you'd gain from another's suffering is of more value than $10... which would classify you as a sadomasochist (http://en.wikipedia.org/wiki/Sadomasochism) ...not that there's anything wrong with that.

I think it's doubtful that you're a sadomasochist. More likely, you feel the need to teach a stranger a lesson for dealing you a perceived injustice. I think that's a natural response, but ultimately futile. In my experience, trying to teach a faceless stranger a lesson is like pissing into the wind.

Atlas-

If he is 40% sure someone will reject $100, but is 100% sure someone will accept $2500, what should he offer (assuming he only does those two choices)?  Is he a moron for either offer?

You're looking at it in absolutes. I gain nothing from $10 in my eyes so I rather piss on the guys insulting and moronic offer.

If the 40% is based on sound logic, it's a gamble that may or may not be worth the extra $2400. It all really depends on how much $2500 means to him. If it's just a game, sure, gamble. If not and your fate could depend on it, it could possibly be moronic.

If I shipped you BTC if you gave me an address to send them to, would you give me one?  I seriously will send you 10 BTC if you give me an address to send them to.

please send them to me! too me they also mean nothing i swear!!  ;D

Na, coins are reserved for CITG's. 
http://www.clubfuji.com/Ash/a%20InternetToughGuy.jpg

tomcollins--you're a jerk.  An asshole, actually.  If we met in real life I would destroy you.  I'm very large and very tall.  But it's all muscle.  So suck it.  And your mom too.

Now, can I have 10 bitcoins?

P.S.  If you think I'm joking there is picture below to prove it.  Asshole.

http://i293.photobucket.com/albums/mm45/antiwave/Stuff/MOST-MUSCULAR-POSE.jpg

LOL.  Good stuff man.

Anyone would, under the right circumstances. Anyone that denies that is lying.

Looks like I shouldn't have been so hard on chimps:

http://www.sciencemag.org/content/318/5847/107.abstract

They are actually smart enough to play the game right.

Likewise, you're not actually smart enough to understand that, for some people, revenge/spite has a nonzero utility.

Some of us are just in it for the lulz.

I think the 'common man' is a moron.

They'll sign their name without reading the fine print.
They'll post details of their assets, their street address and holidays plans to Facebook.
And if they're getting a raw deal on something, they'd rather everyone else did too.

Since I've stated that over and over, I did understand that spite has a non-zero utility for some people.  I made the mistake of thinking they were apes.  But even apes aren't this dumb.

Dude, I agree with almost everything I've seen you write on this forum, but you have a really harsh way of displaying your opinions.  Not everyone who disagrees with you is dumb.  Tomcollins has proven he is intelligent and capable of putting forth some good arguments.  Just sayin

I think the only reason that b2c made that dig was because tom implied that those who didn't play the game his way were not smart. (see bold above)

I don't think there's anything wrong with that! If I was having a bad day, I might flip the guy the bird and walk away, too. However, I wouldn't claim that I was acting in a rational manner.

In colloquial conversation, "rational" is often used to mean, "not crazy". In economics, "rational" has a stricter meaning. A rational actor is someone who will reliably act in his own self-interest given the information at hand and make decisions unemotionally. When I think of a rational actor, I think of Spock (Nimoy not Quinto).

I think Spock would accept $10 without question. Kirk, on the other hand, might take your route. Is Kirk wrong and Spock right? No! There's no right or wrong in this question. But only one of them is acting rationally (at least from an economist's point of view).

PS The fact that a rational actor is well represented by a fictional inhuman alien can explain why economists' predictions are sometimes way off base. Real people don't act rationally all the time! We're highly illogical.

Is it rational to reward anti-social behavior?

If you never see the guy again/deal with him again, is there any rational reason to punish him?

Punishing anti-social behavior is only worth the cost if you actually have to face the person again and deal with them.  Or someone you know and care about does.

And what makes it anti-social?

Personal gratification.

Ah, insults all around.  Fair enough, then.

Even if neither i nor anyone i know will ever meet him again, i still would find it gratifying(sp?) to do my part, even if it's small, in making the world a better place.

There is no guarantee that you would never see him again. Either way it's all about feelings (as estevo tried to explain to you). The minor good feeling I could obtain by receiving a small amount of money would not outweight the bad feeling of letting a greedy person get away with it. If you don't get that bad feeling that's fair enough, but the reason that most people do is that they have the genes that have been the winners in the game of evolution.

How does it make the world a better place?

Would I make the world a better place if I rejected $10 because he was a fool and could have given me a penny?

With the guy receiving a lesson on not being too selfish we're one (small) step closer to having a world with more selfless people.

What is "too" selfish?  What is wrong with being selfish?

Yuck. I can just picture all the rainbows and ponies.

The world will never be more perfect than it is right now.

Other people don't like it and will punish you in social settings (like this game). Figured that was obvious...

All you people, optimising over a single variable.  Makes me think you don't understand yourselves very well.

I think the disagreement boils down to what different people find would be a fair split of the money.

I don't think there is much disagreement that if you had a good reason to spite the other guy, spending some small amount of money to pay back would be warranted.  tomcollins admitted as much in his reply to the (admittedly extreme!) question of vetoing the guy who killed his family.

So the real question is: should you have any reason to spite the other guy?  Which comes down to: is he being an asshole by asking for 99.998% of the money, or is it fair for him to do so just because he "can"?

There is a mindset --let's call it carebear; just a label, no ridicule intended-- that expects humans to display some sensitivity towards each other's utilities.  We are social animals endowed with empathy.  Morals are almost innate, common sense rules of thumb that make life better for everyone.  Equality is seen as a sane default, even in non egalitarian cultures.  An inequality must be warranted: someone worked harder, was smarter, or got luckier.

For a carebear, the fair split in the Ultimatum Game is an equal one (althought others may be pragmatically accepted), and the Splitter is being a jerk for trying to abuse his position.  He's failing the basic rule of "do as you'd like to be done to you".  Being put in the position to accept $10 is doubly indignating.  Not only is he trying to get almost all of the money, but he's relying on you being nice about it (the utility of the $10 themselves barely registers, in this context).

There is a mindset --let's call it cutthroat-- by which, at least when money is involved, humans are expected to behave as selfish aggressive maximizers in a game with only the most basic ground rules: basically, respect for physical integrity and property (some would argue that real cutthroats won't respect anything that can't be defended, but again, it's just a label, take it as defined here).  For the cutthroat, morals are there mostly to avoid physical violence, and behaving morally consists of refraining from theft and aggression.  Behaviors that a carebear would consider "abusive" and "exploitive" are not immoral unless mediated by violence or threat thereof.

For a --um-- throatcutter, the Splitter is just being logical so it's wrong to spite him in first place.  The destructive spiteful reaction thus seems doubly irrational.

Of course I'm simplifying a bit.  Barring that, any big objections so far?

It's a lot better today than it was 50 years ago, so why do you think we have peaked?

I liked this post a lot.  I don't think anyone has any moral duty to me other than not to steal my stuff/cause physical harm/defraud me.  If my sister wins the lottery, she is under no moral duty to share any of it with me (although it might be nice).  If I get myself into trouble, no one owes me by bailing me out.  If they do, great.  I do not consider the person dividing the money to have any moral duty to me to share anything.  I would graciously accept anything he chooses to offer me.

The key definitely where you set the baseline of fairness and moral duty.  The trick is to mislead the reader into thinking that the money should be equally split.  By phrasing it as "they have money together to split" is a great way to trick the reader into thinking that each player has an equal claim, and taking any more is stealing.  But it's not the case.

The logic of some people is truly frightening.  If someone does something "foolish", they deserve punishment!  I would hate to be a neighbor of such a person, where I might do something they consider foolish, and they retaliate by burning my house down or slashing my tires since I "deserve punishment".  Or if I won the lottery or came across a large sum of money, if I did not share it to their liking, I would be worthy of their wrath.  I would suggest a career in government where they would fit in with other thugs.

A variant of this game that favors a more equal distribution, i dunno what it's called,  was somthing i learned when i was a kid, it works kinda like this there is only one big slice of cake left and two kids, to make them both agree it was a fair distribution of the end of the cake, you ask one of them to cut  and the other to decide which kid gets which piece, letting both know their roles beforehand.

I know this thread is a month old, but I did my masters work (years ago) in the ultimatum game.  It would have been so useful to have Bitcoin to conduct the experiments over the internet.  The only problem would be the sample would have been so skewed towards people educated in logic/mathematics/computer science.  Although, that kind of education isn't as strong a predictor of choice as you might think.

The answer for me would depend on my knowledge of the person who can reject the offer.  What is his financial situation?  What non-financial motives might drive his choices?  If it's some random off the street I offer him not a 50/50 but enough that the monetary reward would likely overcome his "spite" reaction to my getting more.  Like maybe $4200/$800.  If he's a purely rational actor, I'd still give him $50 just because I'm nice, but not THAT nice.

If I'm the one able to reject the offer, I try to find some way to convince the other guy that I'm moderately well off and very vengeance-oriented.  Then (whether or not I have been able to communicate this to him) I accept any offer.

I depends on the overall situation. Not only for me, you and the person giving the money but also on the rest of the external world. Such decision has to be made, not only with a greedy mind, but also with the heart. Not with mushy selflessness. Being selfless is as bad as being selfish. We have to ask ourselves: what is the potential for love in this deal?

Eckhart Tolle often talks about this broader state of awareness: http://www.youtube.com/watch?v=1DgPaoObetE

I think the whole problem of game theory as Psychological Science is now finding is that,

*Man is a rationalizing creature as opposed to a rational creature*

You can read on cognitive dissonance theory here.

http://en.wikipedia.org/wiki/Cognitive_dissonance

If humans were rational why would they smoke? It costs you money, makes you sick, possible makes you pay high health costs, and possibly kills you. What is the game theory explanation of why people smoke? There are other also countless examples such as gambling, where people countinue to play a game where it is mathematically rigged against them, people who continue eating, drinking after warnings from the doctor, people outbidding each other on ebay until they pay more than list...on and on.

A *rationalizing* being would rationalize away smoking.

"I will give up next year."
"My uncle lived until he was 90, and he smoked."
"Meh, the harmful effects are exaggerated."

There are an almost limitless ways in which the human mind rationalizes things, as opposed to being rational about them.

In my case, I would NOT accept the $10 to ensure that you get Zero. Now you may think this as irational? However, you now know something about my character. How will you treat me in a future deal? What if there is a second round? What if there is a another game at some point in time in which I get to choose? If somone offered my a mere $10, I would mentally class them as a "tool", somone not to do business with, and not to be trusted; you could possible cut yourself off from any future profits in our relationship by being a "w*nker. So in the bigger picture there's also an element of the "prisoners dilema" for you. On the other hand, if somone was stupid enopugh to accept $10 while I got $4990, I was class them as a "muppet", likely I would try to encourage them to be more of a muppet to see if I could derive more income from them.

So in addition to a lot of people not being rational, even a rational person may look at the biggure picture, the game of real life is a lot more complicated than can be encapsulted in a simple "game". The whole problem with game theory and where it falls down, is that simple scenarios are taken as axiomatic, and in Tohmas Aquinas fashion, you can build a massive logical edifice on these so called "axioms"; what in computer science would be called "garbage in garbage out".

True and we have to ask ourselves: which is the rational way? We are all separate individuals. At the same time we are a part of the whole. Rational choices are those that work in harmony with the whole. It's as simple as that. Being selfless is not rational, because then I disregard myself. Such disregard will cause friction between myself and the world. Nor is being selfish rational unless the selfishness encompasses the whole. Because that will also lead to friction. The rational approach is to care for both myself and others. Without such care there will be friction, like an engine not functioning well.

Then how to make such rational choices? Use both your mind and your heart.

 Rationalizing creature,  rational creature...
Just try to make me look silly and i will send both of us in hell !

That principe did work well in times of cold war.

Here is another way to look at it: Would you to pay $10 out of your pocket to destroy $4990 of someone else's money?

The example above would be considered cruel by some. Yet the same people would argue that declining the deal in the first post is perfectly ethical.

That's not a good analogy. In this case, they know that their money hinges upon you accepting the offer. Offering an unequal distribution carries a higher risk of rejection, but higher potential for reward.

I don't see the problem with the analogy. In both cases, you are net $10 worse off and the other person is $4990 worse off. The ethics of the transaction are all a matter of perspective.

If a person had offended me, yes, I would.

Also note that in the scenario, the $4990 doesn't belong to the other person until the game is over with my having accepted their agreement, so the questions on the morality of destroying someone else's property are not applicable.

If played the game and i received an offer of 10$, i will not take it. Just because the guy who made the offer had the 1st call does not make him more worthy, he is responsible as i am for a good deal for both, i would not take it cause in my book it is not fair. i might accept a less than 50/50 offer just to get out of something but it all end up how much money being offered represents to me!

for example:

he offer me 4 out of 10 ---> probably i will reject it.
he offer me 40 out of 100 ---> i might accept it.
he offer me 400 out of 1000 ---> i probably will take it.
he offer me 4000 out of 1000 ---> i most certain will accept it.
he offer me 100,000, out of 100,000,000 --> 100% will accept

bottom line it all boil down to how much i appreciate fairness in this word and how much of a value i give it.

Okay I'm going to put up 1 BTC to try this for real.

This Ultimatum game offer is for Bituser and fadisaaida.

Bituser, I will give you 1 BTC if you and fadisaaida can agree how to split it.

You can make ONE offer to fadisaaida only, right here in this thread (no cheating via PM!).

If fadisaaida accepts, I will send the coin to both of you based on the split you propose.

If fadisaaida declines, neither will get any coins from me.

damn now this is not fair i have a weakness for bitcoins, :P

Actually, because he acts first, he is 100% more worthy.

This is like saying I bought a lottery ticket, another guy did too, and he won $1,000,000.  But I get the veto power where if he doesn't give me a "fair" amount, I can make sure his money gets destroyed.

tomcollins: i reached page 3 on this page and i saw already few of your examples which are in my opinion focus only on 1 part of the issue. you are focusing on the guy who make the final decision and you seem to ignore the fact that, the winning/loose outcome depends on 2 people, so just because one come after another does not mean any is less significant. the fact the 1st person who make the offer has the knowledge that his offer is not final until he get the approval of the second person should make it in his best interest to make a fair offer. now if it happens and the offer is not fair, it boils down to how much of "taking the high road" and the stake of the offer that the 2nd person is willing. each of us has different factors that will influence this decision (pride,stubborn,fairness definition,financial status, etc..)

How about the strategy to accept the offer if it's within 50% - 25%? If the offer is smaller than 25% then the other person is way too greedy in my opinion. But why reject 51%? What's the logic behind that? Because what if the person making the offer is a complete jerk? And that he or she only gives me 51% so that after the deal I would be called greedy. ;D I don't want to give people that option. He he.

Ok, I'll bite. Normally I would offer a 0.5 to 0.5 split (because i am conserative with money and want the best chance to take something home). But I assume Alex Beckenham wishs to test fadiaaida...


I offer 0.35 BTC to fadiaaida and 0.65 BTC to myself.


I assume these are in dollars.

So by your first post, you should "probably reject it". I am curious what you will pick  ;D.

Quoting this so it can't be edited :)

I am curious too, about a few different aspects of it.

I'm focusing on the 2nd guy because the decision is already made by the time it got to him.  He chooses to accept or reject.  He can get butthurt about it and screw himself to screw the other guy over more, or he can act like a man and not.

See, what makes you think a fair offer is an even one?  That's what your problem is.  You are assuming it's their money to split.

It appears, when the person trying to split the money he/she never even considers to give the other person more than himself/herself. Like in a 49.999/50.001 split.  There are obvious motives for this, but what would the your reaction be if someone offered you a bigger share of the cut?  I personally would first believe I was being scammed double check and triple check the circumstances then take the money cautiously while wondering what in the world this guy/girl is thinking.

All the problem of Ultimate game is there:
If you let that happens once (unfair share distribution).
 - It will happen again.
If you do not want that will happen again
 - don`t let  it happen now.

It`s like Democracy, in rough terms.

And that raises question on Patriotic act again (by the way).

OMG To be honest i didn't think i will hesitate in making my decision but seems like i did, I will reject it just cause im stubborn and it still not worth to invalidate my previous statement, but im gonna be honest and say that i though it will be far easier to reject in such small amount but i was wrong, it is not, a lot of thinking happened in the few seconds i decided , examples :


1. hah ( if i accept then i will look like a fool with my previous statement
2. it is free moeny so rejecting it will be STUPID
3. is it worth taking 0.35 even if it is not a fair ammount

so basicly my statement still stand for "it all boil down on principle/personal triats against "stake" that will determine the willingness of someone to bend fair/not fair rules"

Didn't read all yet, but I think it depends.
If we were the only 2 people in the world, no way Jose.

That's an interesting variant. Another would be: will there be a difference between people who know each other? Would people make different deals with friends and 'loved ones' compared to with strangers? I would NOT. Then again, I'm not your ordinary person. He he.

49/51 to be absolutely sure to get some free $

Well it would depend on how well I knew you. It didn't say if you and I are strangers. If I knew you needed an operation that cost $4,990 and we were friends then this deal would be considered a windfall and I'd agree to it.

If you and I are strangers, then considering we know nothing about each other, I would say no because all else being equal, why should we get unequal amounts?

This reminded me of an article on why psychopathy still exists in the world and how to reduce it. Basically it comes down to it making sense in game theory unless mitigated by reputation. Psychopaths get away with stuff by papering their reputation and smearing others'. If people don't reduce the psychopath's reputation, they will get away with anything.

In this case I wouldn't want to give myself the reputation of accepting less than half with strangers, in case I needed more in the future, unless I was very secure knowing that I wouldn't ever need more. Also I wouldn't want to give the stranger the sense that they can take more than half with strangers, because maybe my friend or family member in need will be in the same transaction in the future? If this person has a bad reputation then absolutely we will neither get any money. If this person has a great reputation then I would assume they possibly made a more well-informed decision, an error or were joking, and we could come to a mutually satisfying understanding after the deal. (See why it's important to reduce a psychopath's reputation? If they don't have a reduced reputation they will get away with anything. Also they smear others' reputations to leave less for others and more for themselves.) If we're strangers maybe this person is a psychopath or has a bad reputation that I don't know about and I wouldn't want to reward them. Beside all this it's basically a chance for each to gather information of the part and whole.

In a real situation it may be very complicated. For example who is the person, organization or company supplying the money? Is the activity legal? Would I want to receive money from the giver?

On a second thought, I would probably say no to any kind of sum offered. Ha! Because I play it safe. And I'm too lazy to check all the circumstances. How's that for controversial, eh?

Money is important, yes, but wouldn't it be liberating to say: "This game sucks. I'm out of here."  ;D Cash is king, they say. But do you really want to kneel before some king? Are you a free individual or a fricken' slave licking the boots of your precious master called money?

Wow, you have foregone 0.35 BTC from a complete stranger, just so that another complete stranger doesn't get 0.65 BTC.

Very interesting indeed.

@bituser, how do you feel about missing out on 0.5 BTC?

One way to think of this is that you had a sure (almost) 0.5 in your hand, but then you gambled it all in order to get 0.65 (you gambled 100% to get a 30% return).

Also, would the outcome of this game change the way you would play the game in the future?

Put both of them in the same game, same positions,  at least two more times to get an idea of how this works out long term with two people that have played the game

Ken Wilber has an interesting explanation of how people act differently depending on what stage of development a person is at. He often uses the Spiral Dynamics model:

http://www.youtube.com/watch?v=Wt5k8cmrtQc

http://www.youtube.com/watch?v=mA7g0iCue9w

Ken Wilber talking about the integral leap: http://www.youtube.com/watch?v=Xujy3qcSphI

I don't feel bad at all. As I said in my earlier post, I would always offer 0.5 BTC during a normal game. I only offered the 0.65 BTC as I figured you would want to see fadisaaida's reaction.

So really this experiment is somewhat invalid. The true experiment is between strangers who don't know anything about each other. By discussing the game first and by having witnesses, the outcome is altered.


fadisaaida listed this as one of his reasons for not taking the 0.35 BTC. But in the true experiment, he would not have taken a stance and could not be seen as a hypocrite for taking the low-ball offer.

Just some food for thought.

Rejecting when everyone knows the result might be perfectly rational, especially for this small sum.  It shows people won't want to mess with you.  But why not take it to the extreme, and say you'll reject anything less than .90 BTC?  If you play the game over and over, you keep rejecting, and people will either keep offering you garbage to punish you or will give in.  Reputation is key.

http://en.wikipedia.org/wiki/Ultimatum_game

So, in this case,

I reject all proposals, where I get (50% - x), if x > 10% of total sum, i.e. if can't call a proposal to be roughly honest (50x50).

Note, if you select another strategy, it simply designates that you are in need of money, i.e. you feel some kind of poverty.
If you live in sufficiency, you will focus upon justice only.

Ha ha. I'm just trying to get a larger perspective on it. Behavior is related to our own level of development. An extreme example is a bunch of baboons at a birthday party. The baboons would make a dash to reach the birthday cake and they would try to grab as big piece of the cake as possible, ripping both the cake and themselves into pieces. How would you explain to the baboons that there is another way to behave in such situation?

Write a HowTo or show them a tutorial video?

Yes I agree, with respect to the original post, this game was invalid.

I still found it interesting though.

I guess they lost the game ¬.¬

Imagine a website or a mobile app where people played this game with each other. People would be able to play many times and their ranking would be displayed publicly. For example a man who managed on average to get people to accept 1% to themselves and 99% to himself, would be ranked very high. But people would see that so they may stop choosing to play the game with him and instead play against other players who gave a higher percentage to them. The ranking score should be adjusted with for example the factor 1 / (1 + 1/n) where n is the number of times played to prevent people who have played only one or two times from being ranked too high.

EDIT: Unfortunately it would be too easy to cheat in the game, such as registering two accounts or letting friends accept outrageous deals. Otherwise it would be a fun game I think. By letting each user create several personalities such as GreedyBill, AverageJoe and CompassionateLama they will be able to try different strategies. Pretty cool service if cheating can be prevented.

It is not important what's the positive speculation is, people should take into account today's price level because waiting for the aim for a while can ruin the whole strategy.