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The Indirect Evolutionary Approach to Explaining Fair Allocations

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Author Info
Steffen Huck (Humboldt University, Berlin, oechsler@wiwi.hu-berlin.de)
Joerg Oechssler (Humboldt University, Berlin, oechsler@wiwi.hu-berlin.de)

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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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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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Related research
Keywords: evolutionary game theory ultimatum game punishment.

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Find related papers by JEL classification:
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

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  2. Bergin, James & Lipman, Barton L, 1996. "Evolution with State-Dependent Mutations," Econometrica, Econometric Society, vol. 64(4), pages 943-56, July. [Downloadable!] (restricted)
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  4. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-38, August. [Downloadable!] (restricted)
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  5. S. Huck & G. Kirchsteiger & J. Oechssler, . "Learning to Like What You Have -Explaining the Endowment Effect-," Sonderforschungsbereich 373 1997-38, Humboldt Universitaet Berlin.
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  6. 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. [Downloadable!] (restricted)
  7. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January. [Downloadable!] (restricted)
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  8. Bolton Gary E. & Zwick Rami, 1995. "Anonymity versus Punishment in Ultimatum Bargaining," Games and Economic Behavior, Elsevier, vol. 10(1), pages 95-121, July. [Downloadable!] (restricted)
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  13. 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. [Downloadable!] (restricted)
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  15. Blume, Lawrence & Easley, David, 1992. "Evolution and market behavior," Journal of Economic Theory, Elsevier, vol. 58(1), pages 9-40, October. [Downloadable!] (restricted)
  16. Bolton, Gary E, 1991. "A Comparative Model of Bargaining: Theory and Evidence," American Economic Review, American Economic Association, vol. 81(5), pages 1096-136, December. [Downloadable!] (restricted)
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  20. Noeldecke,Georg Samuelson,Larry, . "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
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  21. Bester, H. & Gueth, W., 1994. "Is Altruism Evolutionarily Stable ?," Discussion Paper 103, Tilburg University, Center for Economic Research. [Downloadable!]
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  22. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  23. Samuelson Larry, 1994. "Stochastic Stability in Games with Alternative Best Replies," Journal of Economic Theory, Elsevier, vol. 64(1), pages 35-65, October. [Downloadable!] (restricted)
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  25. Johan Stennek, 2000. "The survival value of assuming others to be rational," International Journal of Game Theory, Springer, vol. 29(2), pages 147-163. [Downloadable!] (restricted)
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