Earnings of the rich and the poor

rich-vs-poor

Several experiments deal with the earning of the first move and the consequential effects in Ultimatum Games. For me, the interesting part of those experimental games is the application to topics of society. Therefore, I will refer to a study of Hoffman et al. (1994) which covers the topic of an earned first move in Ultimatum and Dictator Games. The question that came to my mind was how far such a setting can explain social interactions of people and the underlying hierarchical structure. To specify this, I will transfer those findings to possible implications on stereotypes or relationships of the rich and the poor.

The overall setting of Ultimatum Games models the bargaining over a fixed amount of budget. For that, two players are involved and Player 1 offers a part of the budget to his opponent. In the next step Player 2 has two options. First, there is the possibility to accept the offer made before and the budget will be divided respectively to the offer made by Player 1. The second option for Player 2 is to reject the offer with the result that none of the players will gain any payoff. So far, this is what we already have learned. Subsequently, Hoffman et al. (1994) started a series of Ultimatum and Dictator Games where they established small competitions on the right to be Player 1 and making the first offer. In their experiments small knowledge quizzes decided on the position players take in the bargaining so that the position and the bargaining power of the participants are allocated not by chance but the players and especially Player 1 have “earned” their specific rights to bargain. The results show significantly smaller offers from Player 1 and therefore a much higher egoistic behaviour when those special experiments are concerned. Moreover, the first players also expected that their offer had to be accepted. One could now estimate that the rejection rate of the second players has to rise, according to the lower offers but this was in fact not the case. Having analysed all the experiments the result was a significant decrease in the amount of offers by nearly unchanged rates of rejection. So the obvious question is: How can this be the case?

The explanation of the authors for this phenomenon is that “fist movers accurately gauged the willingness of second movers to accept lower offers as we shifted to treatments eliciting lower offers” (Hoffmann et al. 1994, 362) but this seems to neglect the new hierarchical structure in the experiments with an earned first move. With establishing a competition on the positions in the bargaining, even only via a trivial quiz, players were given some kind of superiority and a feeling of being right in their actions. This is especially the case for Player 1, who won the quiz and earned his position to make the first move. With the feeling of having gained a right there is immediately the tendency to misuse this more powerful position by offering lower amounts and generating the expectation that those offers will also be accepted.  Furthermore, Player 2 accepted the lower position and the misuse of Player 1 at once so that lower offers are constantly not rejected. In the case of Player 2 the defeat in the competition leads to a feeling of inferiority and an acceptance of the higher position of Player 1. All in all, the earned first move in Ultimatum Games causes stronger hierarchical differences between the players because the allocation is no more random and the participants have gained their positions through competition.  As a consequence, they use and accordingly accept their perceived rights in a more self-regarding manner.

The interesting part of the experiments conducted by Hoffman et al. is the application on society and the possible implications. What I suppose is that societal phenomena like stereotypes can be partly explained by such experiments. I realize that other factors also contribute to that but an impact can’t be denied. In society, like in the experiments, some people have more rights or higher positions than others or at least perceive that this is the case. Those rights and positions define the degree a person can take part in societal life and on the standard of living. For the explanation of stereotypes, the social gradient of different individuals in having more or less perceived rights is central. Nothing else is the case in the experiment presented above where Players gain different positions and therefore change their behaviour. Such imaginary gained positions or rights can exist due to income, nationality or cultural aspects but they are always based on the hierarchical gradient that groups feel eligible to think or even act in a superior or accordingly inferior manner. With regard to the views or the hierarchy between the rich and the poor we can assume that rich people take the position of Player 1 and poor people represent Player 2. In this case poor people are some kind of dependent on the goodwill of the rich. Moreover, poor people often have small financial ranges and can therefore have much fewer options like the position of Player 2 shows. By taking a look in different societies this is not that deceptive when we think about labour, housing, education and participation in societal life. This leads to the next point: the societal gradient or the hierarchical structure of rich and poor. Being rich and being poor seems to be an immovable fact because societal rights and positions are rigid. But why do poor people not claim better living conditions from the rich? In this case, claiming can be put on a level with the rejection of offers by Player 2 which means nobody gets anything. So poor people face a dilemma in this context whereas rich people have “gained” more rights and higher positions which is revealed by a higher income. Following the experiment they give less of the amount to the poor and the poor accept this situation since they have no other option. With regard to the widening gap between rich and poor this displayed scenario is also far from being nonsense. This article is also far from being a scientific analysis but there are interesting parallels between the mentioned experiments and the relationship of rich and poor people.

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