The Lonely Geek

The first person is given the money, and he is to split it with you.  The catch is, if you don’t accept your portion of the money, neither of you will receive the money.

Sounds simple enough right?

Now, after some time thinking he offers you only 20% of the cash.  You know he is keeping 80%.  What would you do?

An interesting study was done based on this very thing.  Called the Ultimatum Game, which followed these simple rules.  One person is given a stack of cash, and told to divide it between themselves and a second party.  Then that second party is given a chance to accept or reject the offer.  If the offer is rejected, no one will get the money.  You would think that any money is better than no money at all.  But that turns out not to be the case.  When the distribution seemed fair, as in close to 50/50, the money was accepted.  However, if the distribution was perceived as unfair, say 70/30 – 80/20 the money was rejected up to 70% of the time.  So, this test would seem to indicate, that even given free money where we would certainly be better off, we would reject the money to get back at the person for not being fair with the distribution.  Interesting, but the story doesn’t end there.

Another study using what the authors call “The Impunity Game” where the person making the offer gets to keep their share of the cash even if the other share is rejected.  So, there is no apparent way to hurt the individual who is not being fair with the distribution in this game, unless you take in account possible guilt when what you give the other person is still rejected.  Interestingly enough, unfair offers were still rejected based on the hope that the person who assigned the unfair share would feel guilt for not having done the right thing.  When it was split 80/20 some 40% of the people would still reject the money.  This was down from the 70% in the original report.

There is much more on this at the link below.  Please feel free to comment and share this with others.

Irrational markets: people reject free money out of anger – Ars Technica

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