Local competition sparks concerns for fairness in the ultimatum game

Abstract

Humans reject uneven divisions of resources, even at personal cost. This is observed in countless experiments using the ultimatum game, where a proposer offers to divide a resource with a responder who either accepts the division or rejects it (whereupon both earn zero). Researchers debate why humans evolved a psychology that is so averse to inequity within partnerships. We suggest that the scale of competition is crucial: under local competition with few competitors, individuals reject low offers, because they cannot afford to be disadvantaged relative to competitors. If one competes against the broader population (i.e. global competition), then it pays to accept low offers to increase one's absolute pay-off. We support this intuition with an illustrative game-theoretical model. We also conducted ultimatum games where participants received prizes based on pay-offs relative to immediate partners (local competition) versus a larger group (global competition). Participants demanded higher offers under local competition, suggesting that local competition increases people's demands for fairness and aversion to inequality.

Keywords: fairness; game theory; inequity aversion; scale of competition; ultimatum game.

Figure 1.

Predicted willingness to accept ultimatum game offers increases as the scale of competition becomes less local and more global (i.e. goes from low to high number of competitors). Shaded area, accepted offers. Light area, rejected offers. Parameters displayed are a = 0.5 and k = 1. (Online version in colour.)