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Decision-Making
Ultimatum X
Prosocial behavior is good, but don’t be a sucker.
Posted February 13, 2016
You don't get what you deserve; you get what you negotiate. ~ Ruth Lause, business consultant, world traveler, and ayurvedist, channeling business folklore
They think we do it for love. ~ Larry Jacoby, in conversation with J.K., ca. 20 years ago.
Okhi (no) ~ Metaxás to Mussolini [1]
Students, the readers of Psychology Today, and the general public are understandably impatient with the academic excesses of scientific psychology. They want to know how psychological science applies to THEM. One response to this demand is to ignore it. Scientists can reassure one another that psychology is a life science like any other. The discoveries it makes and the models it builds lie beyond the intellectual reach of the ordinary person. The ordinary person cannot and need not care, according to this view, whether there is a neural pathway from the hypothalamus to the striatum or whether noncompensatory decision strategies outperform optimal-weighting multi-attribute strategies under conditions of intermediate noise. Most research scientists advance their careers and their parochial reputations by proposing answers to questions like these, and let the ordinary person be damned.
But then again, some research questions can be represented in the language of everyday experience, and occasionally some of us offer an illustration. Today, let us consider the ultimatum game (UG). In behavioral economics, the UG serves as a paradigm for the study of interpersonal exchange, negotiation behavior, and moral emotions (e.g., Nowak, Page, & Sigmund, 2000). It goes like this: Don has been given $10 and now he can propose a split with Roger. If Roger agrees to the split, both receive the amount of money that Don proposed. If Roger rejects Don's proposal, neither of them receives anything. Two questions arise: How much should Don offer and what should be Roger’s response? What do the Dons and the Rogers of this world actually do?
Traditional economics says Don should offer the smallest possible amount and Roger should take it. This would ensure that no money is wasted, while also enshrining maximum inequality. In practice, the Rogers get very cranky when presented with unfair offers and they rather have nothing if they can make it clear to the Dons that they cannot get away with self-serving inequality. Anticipating Roger’s crankiness, Don must return to the question of how much he should offer in order to maximize his expected value of the game: just enough to get Roger to accept the offer, and as little as possible so that he, Don, can take home a large sum.
You should care about this sort of research because the UG is everywhere. The trick is to recognize it. Every time you see a good or a service offered at a particular price, under the assumption that you can take it or leave it affair, you are the Roger. Unfortunately, your personal power to frustrate the Don by sending an emotional message and reducing his profits is usually limited. A seller who is engaged in thousands of transactions will not care very much if you, as an individual potential buyer, walk away. It would take collective action to reduce the profit margin of certain industries.
Economists love games that use $$ as the currency of human values. Money readily obeys to arithmetical manipulation, even though its psychological scale is not linear. Don might feel, for example, that the $1 he accepts as a loss is worth more to Roger as a gain. It gets more complicated when we realize that the $$ involved in a transaction are only part of what is being transacted. As symbolic creatures, humans are awash in perceptions of meaning. In economic or social transactions, such meanings present themselves as side-payments and side-benefits. Consider help-seeking: a panhandler asks you for a $. An economic creature interested only in having more instead of less $ will never respond positively to such a request (nor will this creature ever tip in a place of business visited only once). Yet, some people give money for nothing. Why? They receive, in their minds, symbolic i.e., non-material, value. They can, for example, enjoy the warm glow of being able to regard themselves as good, caring persons. Skillful help seekers know how to evoke such non-material compensations. Ideally, then, both win. Both get what they want. The exchange is fair. A small amount of money is traded for a reassured self-image.
On the one hand, the above example suggests that a money-for-feeling exchange can be efficient. The sum of the received rewards minus the costs is greater than it would be if no exchange took place. On the other hand, there is the lingering possibility of exploitation. The money seeker can ‘play’ the money giver. In the end of the day, one might argue that money is hard and symbolic gratification is soft. Money can be stored and traded for other goods and services another day. In contrast, symbolic gratification affords a moment of pleasurable consumption, and then it is gone. The money seeker can use symbolic communication to manipulate the giver, whereas the giver has no comparable options at all. [2]
There are many ways in which a skillful seeker can nudge a potential giver to become an actual giver. Let us move away from the penniless panhandler and take a look at the wealthy seeker. This is interesting territory because these seekers are adept at extracting goods and services (help) without offering money in return (or offering too little), although they can afford it. Of course, they are rational in the sense that they are pursuing their own material self-interest. Being wealthy does not mean that it is no longer rational to look out for one's material bottom line. In fact, the rigorous and persistent pursuit of material self-interest is probably the reason why these seekers are wealthy to begin with.
The penultimum game
Das artet ja richtig in Arbeit aus! [This looks like it may actually involve work] ~ R. Krüger, contemplating the tasks ahead
Examples of clever social and economic exchange abound. Here's the tale of a recent invitation to work. A foundation is planning a two-day colloquium, to which they invite only a small and select group of experts. They note that they will cover travel and accommodation expenses but make no mention of compensation. What would you do? For some, the decision is easy: those who base their decisions exclusively on material see immediately that the project is a loss. There’s a total of 5 days away from the bread-winning day job plus at least two days of preparation. Additional costs are jetlag (it’s an intercontinental event) and coordination costs at home (such as finding someone to cover some of the everyday activity). Others, however, might be impressed with the symbolic benefits. The foundation is prestigious; the location is a Monte Carlo kind of venue, if not as swanky as Monte Carlo itself. There is the prospect of hautes hors d’oeuvres, hobnobbing, and basking in the reflected glory of the aristocracy. Last but not least, they asked YOU, and how awesome is that! Those who value both material compensation for work and the symbolic values of self-image enhancing social approval face the difficult task of weighing one against the other. Is the symbolic boost enough to set off the material loss? Here, decision-making becomes very personal, and the final decision can contribute to a redefinition of the self and it may set the stage for making the next decision of this type easier.
One might think that the giver’s (Roger, me and you) decision is only concerned with figuring out personal values (both material and symbolic) and mapping them on the same scale. A consequentialist approach to decision-making says that nothing else should be done. I suspect, however, that many of us (Rogers) would (and should) spend some time contemplating the transaction from the other (Don’s) perspective. This is what research participants do in the UG. Why would Don offer me only $1 and want to keep $9? What’s wrong with him? And what of the foundation? They do, presumably, see value in the contribution you could make. But how much? Perhaps the value they see in your work is equal to their expenses for travel and accommodation. If so, they cannot offer any more. If they expect you to accept the offer under such sparse circumstance, they presumably think that the symbolic value to you is greater than your cost of work and time lost. This would be rather self-flattering on the part of the foundation. It is also possible that the foundation (the seeker) has had sufficient success in the past with limited offers of this kind. If so, they have the privilege of enjoying a buyer's (or seeker's) market. If you decline the offer, there are plenty of others who are willing to step in. You, however, do not know if this is the case. The foundation in turn, knowing that your guesswork will be difficult, can gamble on your ignorance and merely pretend they have had good success.
An unsatisfactory request as described here, made by those who could afford offering a better deal, is interesting because they are trying to turn the tables so that the ‘you-can-afford-it’ claim is leveled against you. They say: We want your work for expenses only because you already have a bill-paying job. Therefore, there is no need for us to regard your contribution as compensatable work. In this essay, I have created the impression that the only rational response is to not respond. The deal is a raw one. You know it and they know it. Of course, one can take another step and do an experiment with reality (to paraphrase Gandhi). If they turn the afford-it argument against you, you can turn the UG against them. Estimate how much material compensation is equal to the work you invest and send an offer: Ladies and Gentlemen, thank you for the invitation to work for you; I will do it for $$. Redefine the exchange as a strictly economic one, setting aside all presumption and assumptions of symbolic value. Symbolic value does not put bread on the table. Now you have the pleasure of being Don. Let them be Roger. If they accept your ultimatum – er, offer – they have seen the light of rational thought. If they do not, they are either poorer than we thought (they cannot afford you), and they will have to shoulder the burden of self-criticism, which says ‘Perhaps our symbolic net-worth is not what we thought it was.’ You, in other words, have played your own ultimatum game, making theirs a mere penultimate game, and does that not feel good? Going back to integrating material with symbolic gains, you can take that to the psychological bank. [3]
Nowak, M. A., Page, K. M., & Sigmund, K. (2000). Fairness versus reason in the ultimatum game. Science, 289, 1773-1775.
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Notes
[1] If you were wondering about Metaxa and Mussolini, I'll have you know that the Greeks to this day consider the former's "No!" to the latter heroic. Mussolini wanted to sack Greece but his fellow dictator declined, in a word. Metaxas and his men then proceeded to humiliate the Italians on the battlefield.
[2] This asymmetry is important. You might think, stereotypically, of the help seeker as the less powerful party. This may be true for the panhandler and others of credible victim status. It is not true of wealthy favor seekers, although they attempt to leverage and benefit from the same prosocial impulse. Any seeker - whether poor or wealthy - has the psychological advantage of defining the situation. They can trigger your internal dialogue regarding your symbolic values and how much you are willing to pay for them. I have argued that you can turn this around partially by countering with your own UG.. There are other ways, but they are rather stark. You can tell the seeker that it is in their best interest if you decline their request because doing so will protect their self-respect and motivate them to seek self-sufficiency. If you elect this option, you can use it on the truly or apparently hapless ("Get a job!"), but not on a Monte Carlo foundation.
[3] One plausible reading of the foundation story is this: we may assume that the proposer is a highly paid foundation officer. His job is to deliver the goods to the board of directors. He needs to justify his role as macher and impresario. One way to do this is by organizing lofty-goal high-brow events. Academics are easy to recruit to fill the agenda with impressive looking talks, addresses, and symposia. Many will do this for the hors d'oeuvres alone, thinking that prestige will eventually convert into pay. They fail to comprehend that the event they bring into being has hard material value for the host in real time. The host would be out of a job if he couldn't demonstrate impressive-looking foundation-sponsored activity. It is, in fact, the host who benefits from the prestige of the professors, and not vice versa. The professors not only work for nothing, but they also generate material income for the host. This arrangement, if true, fits the definition of material exploitation, with the host being the parasite. Playing academics for suckers adds a layer of psychological exploitation.
