Game Theory, Money, and Rationality

(Image by @Doug88888)

Ars Technica has an interesting article today about a paper about to be released in the Proceedings of the National Academy of Sciences (PNAS) about variations to an experiment in Game Theory called the Ultimatum Game. As the Ars article explains,

The basic rules of the Ultimatum Game are simple. One person is given a stack of cash, and told to divide it between themselves and a second party. That second party is then given the chance to accept or reject the offer; if it’s rejected, neither of them get any money. Clearly, any of this free money should be better than nothing, so under assumptions of strictly rational behavior, you might expect all offers to be accepted.

It turns out that tweaking some of the premises of this game leads to some interesting results in terms of human rationality, economic systems, and guilt. I highly recommend reading the article in its entirety. Also, if you’re interested in reading the abstract of actual paper itself, it’s available on the PNAS website here. It also looks like the full paper is available in PDF format if you’d like to read it. Not sure how long it will be available, but it’s there now. Toshio Yamagishi, the lead author, has a website here.