Asymmetric Information in Simple Bargaining Games: An Experimental Study

Bilateral bargaining situations are often characterized by informational asymmetries concerning the size of what is at stake: in some cases, the proposer is better informed, in others, it is the responder. We analyze the effects of both types of asymmetric information on proposer behavior in two different situations which allow for a variation of responder veto power: the ultimatum and the dictator game. We find that the extent to which proposers demand less in the ultimatum as compared to the dictator game is (marginally) smaller when the proposer is in the superior information position. Further we find informed proposers to exploit their informational advantage by offering an amount that does not reveal the true size of the pie, with proposers in the ultimatum game exhibiting this behavioral pattern to a larger extent than those in the dictator game. Uninformed proposers risk imposed rejection when they ask for more than potentially is at stake, and ask for a risk premium in dictator games. We concentrate on proposers, but also explore responder behavior: We find uninformed responders to enable proposers’ hiding behavior, and we find proposer intentionality not to play an important role for informed responders when they decide whether to accept or reject an offer by an (uninformed) proposer.     

Identity and in-group/out-group differentiation in work and giving behaviors: Experimental evidence

We investigate the existence and relative strength of favoritism for in-group versus out-group along multiple identity categories (body type, political views, nationality, religion, and more) in four alternative contexts: (1) giving money in a dictator game, (2) sharing an office, (3) commuting, and (4) work. We carried out two studies. The first study entailed hypothetical situations and imaginary people; the second study was similar to the first, but the dictator game component was incentivized (actual money) and involved actual receivers. Our subjects’ behavior towards others is significantly affected by their respective identities. (1) Those that belong to the in-group are treated more favorably than those who belong to the out-group in nearly all identity categories and in all contexts. (2) Family and kinship are the most powerful source of differentiation, followed by political views, religion, sports-team loyalty, and music preferences, with gender being basically insignificant. (3) The hierarchy of identity categories is fairly stable across the four contexts. (4) Subjects give similar amounts and discriminate between in-group and out-group to similar degrees in the hypothetical and incentivized dictator games.     

Anonymity in the dictator game revisited

Giving in the dictator game has often been interpreted as evidence of other-regarding preferences. We suspect that giving is determined by subjects’ attempts to appear fair in the eyes of recipients and the experimenter. Therefore, we investigate behavior in the dictator game by using the randomized response technique to increase anonymity. Overall, 290 subjects participated in two experiments. The results demonstrate that the randomized response technique reduces giving to negligible amounts compared to the standard double blind condition. Thus, our results suggest that individuals closely follow egoistic motives in the dictator game when anonymity is convincingly implemented.     

What is in a surname? The role of ethnicity in economic decision making

This article reports results from two experiments that investigate possible incidence of discrimination against people with foreign backgrounds in Sweden. In the first experiment, participants played the trust game and the dictator game with co-players of different ethnic affiliation. The family name of the players was exposed to their co-players. Results for the trust game showed no significant discrimination against co-players with foreign backgrounds. On the other hand, the results for the dictator game showed a statistically significant discriminatory behaviour by men against co-players with non-European backgrounds. The discriminatory behaviour was solely a male phenomenon. In the second experiment, the dictator game was replicated to check the stability of the results in the first experiment. The second experiment also examined whether people with foreign backgrounds discriminate against other people with foreign backgrounds; that is, the purpose was to discover whether discrimination is systematic. The observations in the second experiment underlined the results found in the first experiment: foreign co-players are discriminated against by Swedish players. However, we did not find that people with foreign backgrounds discriminated against other people with foreign backgrounds.     

Keeping others in our mind or in our heart? Distribution games under cognitive load

It has recently been argued that giving is spontaneous while greed is calculated (Rand et al., in Nature 489:427–430, 2012). If greed is calculated we would expect that cognitive load, which is assumed to reduce the influence of cognitive processes, should affect greed. In this paper we study both charitable giving and the behavior of dictators under high and low cognitive load to test if greed is affected by the load. This is tested in three different dictator game experiments. In the dictator games we use both a give frame, where the dictators are given an amount that they may share with a partner, and a take frame, where dictators may take from an amount initially allocated to the partner. The results from all three experiments show that the behavioral effect in terms of allocated money of the induced load is small if at all existent. At the same time, follow-up questions indicate that the subjects’ decisions are more impulsive and less driven by their thoughts under cognitive load.     

From the lab to the field: envelopes,dictators and manners

This paper reports results of a natural field experiment on the dictator game where subjects are unaware that they are participating in an experiment. Three other experiments explore, step by step, how laboratory behavior of students relates to field behavior of a general population. In all experiments, subjects display an equally high amount of pro-social behavior, whether they are students or not, participate in a laboratory or not, or are aware of their participating in an experiment or not. This paper shows that there are settings where laboratory behavior of students is predictive for field behavior of a general population.     

Taking,giving, and impure altruism in dictator games

We show that, if giving is equivalent to not taking, impure altruism could account for List’s (in Journal of Political Economy 115(3):482–493, 2007) finding that the payoff to recipients in a dictator game decreases when the dictator has the option to take. We examine behavior in dictator games with different taking options but equivalent final payoff possibilities. We find that recipients tend to earn more as the amount the dictator must take to achieve a given final payoff increases, a result consistent with the hypothesis that the cold prickle of taking is stronger than the warm glow of giving. We conclude that not taking is not equivalent to giving and agree with List (in Journal of Political Economy 115(3):482–493, 2007) that the current social preference models fail to rationalize the observed data.     

Dictator monopolies and essential goods: experimental evidence

Monopolists set prices and if the good is unessential this may place the consumer in an uncomfortable position. But if the good is essential the consumer faces a pay-to-live or -die choice. Dictator and ultimatum games are superficially similar in that one game offers the right of refusal, while the other does not. The dictator monopoly is, however, not a game, and behaviour could be radically different in the market environment versus game environment. We recast the dictator game as a dictator monopoly experiment and find that the fairness characteristic of the game evaporates quickly as rounds progress.     

The Ultimatum Game: Optimal Strategies without Fairness

The ultimatum game is simple and this facilitates its use in the study of predictions of game theory. Experimental evidence suggests that it does not predict individual behavior well, unless individuals gain welfare from fairness in transactions, or have expectations about some wider game. Our model excludes any notion of fairness by including (potential) rivalry in transactions. In this game the proposer's expectations yield outcomes that are consistent with experimental evidence. Offers can be large or small, with none in an intermediate range. The consequent distribution appears in dictator game experiments. Our model explains how it is generated by expectations.Journal of Economic LiteratureClassification Numbers: C72, D82, D84.     

Reciprocity—an indirect evolutionary analysis

This paper investigates agents who face a stylized pecuniary ‘game of life’ comprising the ultimatum game and the dictator game. Utility may but need not be attached to equity and reciprocity, as formalized by Falk and Fischbacher (Games Econom Behav, 54(2): 293–315, 2006) but, critically, this social component of preferences cannot be conditioned on whether an ultimatum or a dictator game is played. Evolutionary fitness of agents is determined solely by material success. Under these conditions, a strong preference for reciprocity, but little interest in equity as such evolves. Possible exogenous constraints that link reciprocity and equity concerns imply long-run levels of both which depend on the relative frequency of ultimatum vs. dictator interaction in agents’ multi-game environment. Financial support from the German Academic Exchange Service (DAAD) is gratefully acknowledged.     

Revisiting the impact of impure public goods on consumers’ prosocial behavior: A lab experiment in Shanghai

In this study, we implemented a dictator game experiment to examine how the increase of the public characteristic in an impure public good affects individuals’ prosocial behaviour. A within‐subject design was used in the experiment. The dictator game was repeated six times with an impure public good introduced in four of them. We observe that the increase of the public characteristic in an impure public good partly crowds out individuals’ subsequent donations, which could be explained by a seemingly ‘mental accounting’ mental process. In addition, we also find that the selfish behaviour of individuals in dictator games with impure public goods, to some extent, has an inertia influence on their subsequent donations when the impure public good is removed.     

Reciprocity under moral wiggle room: Is it a preference or a constraint?

We analyze reciprocal behavior when moral wiggle room exists. Dana et al. (Econ Theory 33(1):67–80, 2007) show that giving in a dictator game is inconsistent with distributional preferences as the giving rate drops when situational excuses for selfish behavior are provided. Our binary trust game closely follows their design. Only a preceding stage (safe outside option vs. enter the game) is added in order to introduce reciprocity. We find significantly lower rates of selfish choices in the trust baseline in comparison to our treatments that feature moral wiggle room manipulations and a dictator baseline. It seems that reciprocal behavior is not only due to people liking to reciprocate but also because they feel obliged to do so.     

Dictators and oligarchs: A dynamic theory of contested property rights

In an economy with weak economic and political institutions, the major institutional choices are made strategically by oligarchs and dictators. The conventional wisdom presumes that as rent-seeking is harmful for oligarchs themselves, institutions such as property rights will emerge spontaneously. We explicitly model a dynamic game between the oligarchs and a dictator who can contain rent-seeking. The oligarchs choose either a weak dictator (who can be overthrown by an individual oligarch) or a strong dictator (who can only be replaced via a consensus of oligarchs). In equilibrium, no dictator can commit to both: (i) protecting the oligarchs' property rights from the other oligarchs and (ii) not expropriating oligarchs himself. We show that a weak dictator does not limit rent-seeking. A strong dictator does reduce rent-seeking but also expropriates individual oligarchs. We show that even though eliminating rent-seeking is Pareto optimal, weak dictators do get appointed in equilibrium and rent-seeking continues. This outcome is especially likely when economic environment is highly volatile.     

The external validity of giving in the dictator game

We investigate the external validity of giving in the dictator game by using the misdirected letter technique in a within-subject design. First, subjects participated in standard dictator games (double blind) conducted in labs in two different studies. Second, after four to five weeks (study 1) or two years (study 2), we delivered prepared letters to the same subjects. The envelopes and the contents of the letters were designed to create the impression that they were misdirected by the mail delivery service. The letters contained 10 Euros (20 Swiss Francs in study 2) corresponding to the endowment of the in-lab experiments. We observe in both studies that subjects who showed other-regarding behavior in the lab returned the misdirected letters more often than subjects giving nothing, suggesting that in-lab behavior is related to behavior in the field.     

Reciprocity and Giving in a Consecutive Three‐Person Dictator Game with Social Interaction

We study pure indirect reciprocity by setting up a modified dictator game with three players A, B, and C acting sequentially. Subject A takes a share of a pie and passes the rest to subject B, while B divides the rest between herself and C. We find that this consecutive three‐person dictator game increases generosity compared with the traditional two‐person dictator game. We analyze the influence of social interaction and uncertainty. In treatments with certainty we observe pure indirect reciprocity: B indirectly reciprocates for A's behavior in the decision on how generous to be to C.     

The effects of the take-option in dictator-game experiments: a comment on Engel’s (2011) meta-study

In this paper, we report a replication of Engel’s (Exp. Econ. 14(4):583–610, 2011) meta-study of dictator game experiments. We find Engel’s meta-study of dictator game experiments to be robust, with one important exception: the coding of the take-option (List in J. Polit. Econ. 115(3):482–493, 2007; Bardsley in Exp. Econ. 11(2):122–133, 2008; Cappelen et al. in Econ. Lett. 118(2):280–283, 2013). While Engel reports this as having no statistically significant effect, in our replications, we find an economically and statistically significant negative effect on giving in line with the relevant literature.     

The effect of luck framing on distributional preferences

This paper experimentally investigated luck framing. Specifically, we analyzed the difference between being assigned an advantageous role in a distribution game and being assigned the same role while being explicitly told that you were lucky to be in that favorable position. We tested this difference by implementing a dictator game and a no-veto-cost ultimatum game. We observed that: a) dictators transferred larger amounts in the game when they were explicitly told they were lucky to be the dictator compared to dictators who did not receive this message, and b) responders in the no-veto-cost ultimatum game who were explicitly told they were lucky to be in that role were significantly less likely to reject a particular offer compared to responders in the game who did not receive this message. The combination of these results is consistent with the hypothesis that people are more likely to behave in a more prosocial and egalitarian manner when they are reminded that they are lucky to be in a particular position.     

At the mercy of a prisoner three dictator experiments

We test male juvenile prisoners on a dictator game with another anonymous co-prisoner as recipient. Prisoners give more than students, but less than nonstudents of their age. They give more to a charity than to another prisoner. In one of two experiments, those convicted for violent crime give more than those convicted for property crime.     

Motives for sharing in social networks

What motivates people in rural villages to share? We first elicit a baseline level of sharing using a standard, anonymous dictator game. Then using variants of the dictator game that allow for either revealing the dictator's identity or allowing the dictator to choose the recipient, we attribute variation in sharing to three different motives. The first of these, directed altruism, is related to preferences, while the remaining two are incentive-related (sanctions and reciprocity). We observe high average levels of sharing in our baseline treatment, while variation across individuals depends importantly on the incentive-related motives. Finally, variation in measured reciprocity within the experiment predicts observed ‘real-world’ gift-giving, while other motives measured in the experiment do not predict behavior outside the experiment.     

Implications of trust, fear, and reciprocity for modeling economic behavior

This paper reports three experiments with triadic or dyadic designs. The experiments include the moonlighting game in which first-mover actions can elicit positively or negatively reciprocal reactions from second movers. First movers can be motivated by trust in positive reciprocity or fear of negative reciprocity, in addition to unconditional other-regarding preferences. Second movers can be motivated by unconditional other-regarding preferences as well as positive or negative reciprocity. The experimental designs include control treatments that discriminate among actions with alternative motivations. Data from our three experiments and a fourth one are used to explore methodological questions, including the effects on behavioral hypothesis tests of within-subjects vs. across-subjects designs, single-blind vs. double-blind payoffs, random vs. dictator first-mover control treatments, and strategy responses vs. sequential play. Electronic Supplementary Material Supplementary material is available in the online version of this article at . JEL Classification C70, C91, D63, D64