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The Indirect Evolutionary Approach to Explaining Fair Allocations

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  • Steffen Huck

    (Humboldt University, Berlin, oechsler@wiwi.hu-berlin.de)

  • Joerg Oechssler

    (Humboldt University, Berlin, oechsler@wiwi.hu-berlin.de)

Abstract

Experimental results on the ultimatum game show clearly that (1) large fractions of players offer a 'fair' allocation and (2) that unfair (but positive) offers are systematically rejected. We offer an explanation of this behavior using the 'indirect evolutionary approach' which is based on the assumption that players behave rationally for given preferences but that their preferences change through an evolutionary process. We prove that despite anonymous interaction a preference for punishing unfair offers is an evolutionarily successful strategy if players interact in small groups. This leads players to split the resource equally almost always. However, the equal split is not due to 'true fairness' (or 'altruism') but is entirely caused by the (justified) fear that unfair offers might be rejected.

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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 9507001.

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Date of creation: 31 Jul 1995
Date of revision: 27 Aug 1998
Handle: RePEc:wpa:wuwpga:9507001

Note: This is the final version forthcoming in "Games and Economic Behavior"
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Keywords: evolutionary game theory; ultimatum game; punishment.;

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  1. Steffen Huck & Georg Kirchsteiger & Jörg Oechssler, 2003. "Learning to Like What You Have - Explaining the Endowment Effect," Bonn Econ Discussion Papers bgse5_2003, University of Bonn, Germany.
  2. Georg Kirchsteiger, 1994. "The role of envy in ultimatum games," ULB Institutional Repository 2013/5925, ULB -- Universite Libre de Bruxelles.
  3. Noeldecke,Georg & Samuelson,Larry, . "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
  4. Cressman, R. & Schlag, K. H., 1998. "The Dynamic (In)Stability of Backwards Induction," Journal of Economic Theory, Elsevier, vol. 83(2), pages 260-285, December.
  5. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
  6. Samuelson, L. & Zhang, J., 1990. "Evolutionary Stability In Symmetric Games," Working papers 90-24, Wisconsin Madison - Social Systems.
  7. G. Bolton, 2010. "A comparative model of bargaining: theory and evidence," Levine's Working Paper Archive 263, David K. Levine.
  8. Thaler, Richard H, 1988. "The Ultimatum Game," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 195-206, Fall.
  9. Prasnikar, Vesna & Roth, Alvin E, 1992. "Considerations of Fairness and Strategy: Experimental Data from Sequential Games," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 865-88, August.
  10. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-66, May.
  11. Bolton Gary E. & Zwick Rami, 1995. "Anonymity versus Punishment in Ultimatum Bargaining," Games and Economic Behavior, Elsevier, vol. 10(1), pages 95-121, July.
  12. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, vol. 8(1), pages 56-90.
  13. Harrison, Glenn W & McCabe, Kevin A, 1996. "Expectations and Fairness in a Simple Bargaining Experiment," International Journal of Game Theory, Springer, vol. 25(3), pages 303-27.
  14. Becker, Gary S, 1976. "Altruism, Egoism, and Genetic Fitness: Economics and Sociobiology," Journal of Economic Literature, American Economic Association, vol. 14(3), pages 817-26, September.
  15. Forsythe Robert & Horowitz Joel L. & Savin N. E. & Sefton Martin, 1994. "Fairness in Simple Bargaining Experiments," Games and Economic Behavior, Elsevier, vol. 6(3), pages 347-369, May.
  16. Samuelson, Larry & Zhang, Jianbo, 1992. "Evolutionary stability in asymmetric games," Journal of Economic Theory, Elsevier, vol. 57(2), pages 363-391, August.
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