Dictator game

Template:Short description In social psychology and economics, the dictator game is a popular experimental instrument <ref>Template:Cite journal</ref> a derivative of the ultimatum game. It involves a single decision by the "dictator" player: given an amount of money, how much to keep and how much to send to another player.<ref name="bolton">Template:Cite journal</ref> Although the "dictator" has the most power, the game has mixed results based on different behavioral attributes.<ref name="Watson">Template:Cite book</ref> The results – where most dictators choose to send money – evidence the role of fairness and norms in economic behavior, and undermine the assumption of narrow self-interest when given the opportunity to maximise one's own profits.<ref>Template:Cite journal</ref>

DescriptionEdit

The dictator game is a derivative of the ultimatum game, in which one player (the proposer) provides a one-time offer to the other (the responder). The responder can choose to either accept or reject the proposer's bid, but rejecting the bid would result in both players receiving a payoff of 0. In the dictator game, the first player, "the dictator", determines how to split an endowment (such as a cash prize) between themselves and the second player<ref name="andreoni">Template:Cite encyclopedia</ref> (the recipient). The dictator's action space is complete and therefore is at their own will to determine the endowment, which ranges from giving nothing to giving all the endowment. The recipient has no influence over the outcome of the game, which means the recipient plays a passive role.

While the ultimatum game is informative, it can be considered an over simplified model when discussing most real-world negotiation situations. Real-world games tend to involve offers and counteroffers while the ultimatum game is simply player one placing forward a division of an amount that player 2 has to accept or reject. Based on this limited scope, it is expected that the second player will accept any offer they are given, which is not necessarily seen in real world examples.<ref name="Watson" />

ApplicationEdit

The initial game was developed by Daniel Kahneman in the 1980s and involved three parties, with one active and two passive participants. However, it was only in 1994 that a paper by Forsythe et al. simplified this to the contemporary form of this game with one decision-maker (the dictator) and one passive participant (the recipient). One would expect players to behave "rationally" and maximize their own payoffs, as shown by the homo economicus principle; however, it has been shown that human populations are more “benevolent than homo economicus” and therefore rarely do the majority give nothing to the recipient.<ref name="Engel-2011">Template:Cite journal</ref>

In the original dictator game, the dictator and the recipient were randomly selected and completely unknown. However it was found that the result was different depending on the social distance between the two parties. The level of "social distance" that a dictator and a recipient have changes the ratio of endowment that the dictator is willing to give. If the dictator in the game has anonymity with the recipient, resulting in a high level of social distance, they are most likely to give less endowment, whereas players with a low level of social distance, whether they are very familiar with each other or shallowly acquainted, are more likely to give a higher proportion of the endowment to the recipient.<ref name="andreoni" />

When players are within an organization, they are likely to have a low level of social distance. Within organizations, altruism and prosocial behavior are heavily relied on in dictator games for optimal organizational output. Prosocial behavior encourages the “intention of promoting the welfare of the individual, group, or organization toward which it is directed”.<ref>Brief and Motowildo, 1986, p. 711</ref>

ExperimentsEdit

In 1988 a group of researchers at the University of Iowa conducted a controlled experiment to evaluate the homo economicus model of behavior with groups of voluntarily recruited economics, accounting, and business students. These experimental results contradict the homo economicus model, suggesting that players in the dictator role take fairness and potential adverse consequences into account when making decisions about how much utility to give the recipient.<ref name="forsythe">Template:Cite journal</ref> A later study in neuroscience further challenged the homo economicus model, suggesting that various cognitive differences among humans affect decision-making processes, and thus ideas of fairness.<ref>Template:Cite journal</ref>

Experimental results have indicated that adults often allocate money to the recipients, reducing the amount of money the dictator receives.<ref name="bolton" /><ref name="forsythe" /><ref>Template:Cite journal</ref><ref>For an overview see Template:Cite book</ref> These results appear robust: for example, Henrich et al. discovered in a wide cross-cultural study that dictators allocate a non-zero share of the endowment to the recipient.<ref name="Henrich">Template:Cite book</ref> In modified versions of the dictator game, children also tend to allocate some of a resource to a recipient and most five-year-olds share at least half of their goods.<ref>Template:Cite journal</ref>

A number of studies have examined psychological framing of the dictator game with a version called "taking" in which the player "takes" resources from the recipient's predetermined endowment, rather than choosing the amount to "give".<ref name="AlevyJeffries2014">Template:Cite journal</ref><ref name="ZhangOrtmann2013">Template:Cite journal</ref> Some studies show no effect between male and female players, but one 2017 study reported a difference between male and female players in the taking frame, with females allocating significantly more to the recipient under the "taking" frame compared to the "giving" frame, while males showed exactly the opposite behavior – nullifying the overall effect.<ref name="ChowdhuryJeon2017">Template:Cite journal</ref>

In 2016, Bhogal et al. conducted a study to evaluate the effects of perceived attractiveness on decision-making behavior and altruism in the standard dictator game, testing theories that altruism may serve as a courtship display. This study found no relationship between attractiveness and altruism.<ref>Template:Cite journal</ref>

If these experiments appropriately reflect individuals' preferences outside of the laboratory, these results appear to demonstrate that either:

Dictators' utility functions include only money that they receive and dictators fail to maximize it.
Dictators' utility functions may include non-tangible harms they incur (for example self-image or anticipated negative views of others in society), or
Dictators' utility functions may include benefits received by others.

Additional experiments have shown that subjects maintain a high degree of consistency across multiple versions of the dictator game in which the cost of giving varies.<ref>Template:Cite journal</ref> This suggests that dictator game behavior is well approximated by a model in which dictators maximize utility functions that include benefits received by others, that is, subjects are increasing their utility when they pass money to the recipients. The latter implies they are maximizing a utility function that incorporates the recipient's welfare and not only their own welfare. This is the core of the "other-regarding" preferences. A number of experiments have shown that donations are substantially larger when the dictators are aware of the recipient's need of the money.<ref>Template:Cite journal</ref><ref>Template:Cite journal</ref> Other experiments have shown a relationship between political participation, social integration, and dictator game giving, suggesting that it may be an externally valid indicator of concern for the well-being of others.<ref>Template:Cite journal</ref><ref>Template:Cite journal</ref><ref>Template:Cite journal</ref><ref>Template:Cite journal</ref> Regarding altruism, recent papers have shown that experimental subjects in a lab environment do not behave differently to other participants in an outside setting.<ref>Template:Cite journal</ref> Studies have suggested that behavior in this game is heritable.<ref>Template:Cite journal</ref><ref>Template:Cite journal</ref>

ChallengesEdit

The idea that the highly mixed results of the dictator game prove or disprove rationality in economics is not widely accepted. Results offer both support of the classical assumptions and notable exceptions which have led to improved holistic economic models of behavior. Some authors have suggested that giving in the dictator game does not entail that individuals wish to maximize others' benefit (altruism). Instead they suggest that individuals have some negative utility associated with being seen as greedy, and are avoiding this judgment by the experimenter. Some experiments have been performed to test this hypothesis with mixed results.<ref name="Hoffman-1994">Template:Cite journal</ref><ref name="bolton" />

Additionally, the mixed results of the dictator game point to other behavioral attributes that may influence how individuals play the game. Specifically, people are motivated by altruism and how their actions are perceived by others, rather than solely by avoiding being viewed as greedy. There have been experiments that more deeply study people's motivations in this game. One experiment showed that females are more likely to value altruism in their actions than males. They are also more likely to be more altruistic towards other females than to males. This proves that there are many extraneous variables that may influence players’ decisions in the dictator game, such as an individual’s own motivations and the other players.<ref>Template:Cite thesis</ref>

VariantsEdit

The Trust Game is similar to the dictator game, but with an added first step. It is a sequential game involving two players, the trustor and the trustee.<ref>Thielmann, Isabel & Böhm, Robert & Ott, Marion & Hilbig, Benjamin. (2021). Economic Games: An Introduction and Guide for Research. Collabra Psychology. 7. 19004. 10.1525/collabra.19004.</ref> Initially called the Investment Game by Berg, Dickhaut and McCabe in 1995, the trust game originated as a design experiment to study trust and reciprocity in an investment setting.<ref>Berg, J.; Dickhaut, J.; McCabe, K. (1995). “Trust, Reciprocity, and Social History”. Games and Economic Behavior. 10 (1): 122-142. {{#invoke:doi|main}}.</ref> In the trust game, the trustor first decides how much of an endowment to give to the trustee. The trustor is also informed that whatever they send will be tripled by the experimenter. Then the trustee (now acting as a dictator) decides how much of this increased endowment to allocate to the trustor. Thus the dictator's (or trustee's) partner must decide how much of the initial endowment to trust with the dictator (in the hopes of receiving the same amount or more in return). In this game, it is all about trust and trustworthiness in order to determine the behavior of the two players.<ref name="Alos">Alos-Ferrer, C.; Farolfi, F. (2019). “Trust Games and Beyond”. Frontiers in Neuroscience. 13: 887. {{#invoke:doi|main}}</ref> Since trust is an important factor in economic behavior, trust and trustworthiness must be addressed at an individual level by utilizing experimental designs involving both roles in different trust games.<ref name="Alos"/> The experiments rarely end in the subgame perfect Nash equilibrium of "no trust". Often, studies found that having more trust resulted in the participant losing more in the end.<ref name="Alos"/> Since the decision to trust is dependent on the belief that the other participant will reciprocate, according to Berg et al.'s study, then the first participant will usually send an endowment even when they are not expecting anything back, similar to the practical conditions of participating in the lottery.<ref name="Alos"/> This is because the trustor wants to avoid the responsibility of leaving the trustee with no endowment and risking zero payoffs at the end of the game.<ref name="Alos"/> A pair of studies published in 2008 of identical and fraternal twins in the US and Sweden suggests that behavior in this game is heritable.<ref>Template:Cite journal</ref>

Betrayal aversion is another major factor that weighs the impact of trust and risk, determining whether trusting another person is equivalent to taking a risky bet.<ref name="Bohnet">Bohnet, I.; Zeckhauser, R. (2004). “Trust, risk and betrayal”. J. Econ. Behav. Organ. 55: 467–484. {{#invoke:doi|main}}</ref> Initially coined by Bohnet and Zeckhauser, betrayal aversion could prevent the trustor from not trusting the trustee due to the social risk of having zero payoffs.<ref name="Bohnet"/> Their study looked at a practical experiment where participants were randomly paired with one another to increase the probability that the outcome would be dependent on the actions of the trustee selected. Results from the study showed that regardless of whether the trustor placed a safe or risky bet, the payoffs were not equivalent to the trustee's payoffs.<ref name="Bohnet"/> Ultimately, Bohnet and Zeckhauser assessed potential risk with the Trust Game and the relative hesitation made by each participant when deciding the amount to give in the game.

A variation of the dictator game called the "taking" game (see “Experiments" section above for further detail) emerged from sociological experiments conducted in 2003, in which the dictator decides how much utility to “take” from the recipient's pre-determined endowment. This dictator game variation was designed to evaluate the idea of greed, rather than the idea of fairness or altruism generally evaluated with the standard dictator game model, also referred to as the "giving" game.<ref name="ChowdhuryJeon2017" />

Fairness and moral behaviorEdit

To examine whether giving in dictator games stems from sense of fairness, Andreoni and Bernheim (2009) conducted an experiment in which participants were given $20 to distribute. In some cases, the dictator’s decision was not implemented, and instead, the recipient received either $0 or, in an alternative treatment, $1. As part of the experiment, the recipients and the dictators were publicly identified, and the final allocation was announced at the end of the study. The experiment results suggest that as the probability of the dictator’s decision being overridden increased, so did the likelihood that the dictator would offer $0. In contrast, the probability of choosing an equal split decreased. Furthermore, increasing the fallback payment from $0 to $1 when the dictator’s decision was not implemented led to a decline in the likelihood of offering $1 while increasing the likelihood of selecting the equal split. The authors concluded that people are generous to a certain extent and do take consideration at their public image.<ref>Template:Cite journal</ref>

Snir (2014) further explored these dynamics by allowing dictators to determine the probability of selecting each of three possible allocations of €12 between themselves and a recipient:

Option A: The dictator received €12, and the recipient received €0.
Option B: The dictator received €9, and the recipient received €3.
Option C: Both the dictator and recipient received €6 each.

The findings indicate that, on average, dictators chose the selfish allocation (Option A) 70% of the time, regardless of whether the recipients were only aware of the outcomes or also knew the probabilities.<ref>Template:Cite journal</ref>

The effect of the sum available for distributionEdit

Forsythe et al. (1994) found that doubling the available sum from $5 to $10 did not change the proportion of the “pie” the dictator allocated to the recipient.<ref>Template:Cite journal</ref>

Similarly, Carpenter et al. (2005) observed that increasing the sum from $10 to $100 did not affect the relative share given by the dictator.<ref>Template:Cite journal</ref>

However, List and Cherry (2008) found that increasing the sum from $10 to $100 led to an increase in donations, but by less than the proportional increase in the total amount.<ref>Template:Cite journal</ref>

Engel (2011) conducted a meta-analysis and concluded that as the available sum increased, dictators tended to keep a larger proportion for themselves.<ref name="Engel-2011" />

Expanding the dictator’s range of choices also influenced behavior. List (2007) and Bardsley (2008) allowed dictators to not only give money but also take money from the recipient.<ref>Template:Cite journal</ref> This led to decreased generosity, although only a few participants opted for full selfishness. Nonetheless, some chose to take money from the recipient.<ref>Template:Cite journal</ref>

The effect of anonymityEdit

Dufwenberg and Muren (2006) examined how anonymity affects giving by conducting two versions of the dictator game:

In one version, dictators sat next to each other and publicly circled the amount they chose to give. Payments were also made in front of everyone.
In another version, the decision was made in a private room.

The results showed that public payments decreased the average level of giving.<ref>Template:Cite journal</ref>

Similarly, Charness and Gneezy (2008) compared a completely anonymous dictator game (where neither party knew each other’s identity) to one where each dictator knew the recipient's last name. Removing full anonymity increased giving from 18.3% to 27.2%.<ref>Template:Cite journal</ref> Bechler et al. (2015) found that this effect persisted even when the available sum was increased.<ref>Template:Cite journal</ref>

Goeree et al. (2010) conducted a study mapping students' social networks in a California high school. He finds that the closer the social ties between the dictator and the recipient, the higher the level of giving.<ref>Template:Cite journal</ref>

Andreoni and Rao (2011) found that giving increased significantly when the recipient could directly ask the dictator for a donation.<ref>Template:Cite journal</ref> Engel’s (2011) meta-analysis of 20,813 observations showed that familiarity increased giving by an average of 0.658 percentage points.<ref name="Engel-2011" />

To control for the possibility that participants might give more out of shame in front of the experimenter, Hoffman et al. (1994) conducted an experiment where even the experimenter did not know who the dictator was and who the recipient was.<ref>Template:Cite journal</ref> In this setup, the number of participants choosing to keep all the money significantly increased. In a follow-up study (Hoffman et al., 1996), the researchers manipulated anonymity levels and found that giving decreased as anonymity increased.<ref>Template:Cite journal</ref>

The effect of messages and subtle cueEdit

Brañas-Garza (2007) conducted a dictator game where participants received an instructional note stating: "Remember, the decision is yours." This subtle message significantly increased giving.<ref>Template:Cite journal</ref>

Burnham (2003) found that showing participants a picture of the recipient did not affect the number of people who chose to give $0, but those who did give ended up donating more.<ref>Template:Cite journal</ref>

Rigdon et al. (2009) tested the impact of subtle visual cues by presenting two different images to participants:

A neutral arrangement of three dots.
Three dots arranged to resemble a pair of watching eyes.

Dictators exposed to the eye-like pattern gave more, with a particularly strong effect on male participants. This suggests that even minimal social cues can influence generosity.<ref>Template:Cite journal</ref>

The effect of the way the money was obtainedEdit

The dictator game examines how much an individual is willing to give to another person. However, giving behavior is influenced by how the dictator obtained their money.

Hoffman et al. (1994) assigned dictator roles based on performance in a test,<ref name="Hoffman-1994" /> and Cherry et al. (2002) linked the amount available for allocation to test performance. In both cases, dictators gave less when they felt they had earned their money.<ref>Template:Cite journal</ref>

Oxoby and Spraggon (2008) further found that when the recipient had to earn the sum available for distribution, dictators were more generous, sometimes even giving more than 50%. These results suggest that perceptions of fairness depend on whether wealth was acquired by luck or effort. When money is earned through personal effort, people feel less obligated to share it. However, if the money is obtained by chance, the expectation of fairness increases.<ref>Template:Cite journal</ref>

ReferencesEdit