The Ultimatum Game

An important point made in Watts’ Everything Is Obvious is that common sense varies from culture to culture. A good example can be found in the ultimatum game. The game begins with two people. One of them is given a sum of money, say $100. That person is instructed to split the money with the second person. The split can vary from nothing to the entire monetary bundle. The second player gets to accept the offer or to reject it. If the second player accepts the offer, they both leave with their agreed upon splits. If the second player refuses the offer, then they both walk away with nothing. Now from a strictly rational perspective the first player could keep $99 and offer the second player $1 and the second player would agree as $1 should be better than nothing. But the second player does, and the first player should, have some notion of fairness. In research done in the industrialized countries researchers have found that most players propose a fifty fifty split and that offers of less than $30 are typically rejected.

When researchers replicated this game in fifteen small-scale preindustrialized countries across the five continents the results were not replicated. The Machiguenga tribe in Peru tended to offer about a quarter of the total amount and virtually none of these offers were refused. However, the Au and Gnau tribes of Papua New Guinea tended to make offers that were even better than fifty fifty and these hyperfair offers tended to get rejected as often as the unfair offers.

Now if the players from the respective communities were asked why they did what they did, they likely responded that it was a matter of common sense.

Tags: Common Sense, cultural differences, Fairness, Ultimatum Game