Dictator game

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.[6] (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 too simple of a 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.[3]

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.[7]

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 the recipient has 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.[5]

When players are within an organization, they most likely 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” (Brief and Motowildo, 1986, p 711).

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.[8] 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.[9]

Experimental results have indicated that adults often allocate money to the recipients, reducing the amount of money the dictator receives.[2][8][10] These results appear robust: for example, Henrich, et al. discovered in a wide cross-cultural study that dictators do allocate a non-zero share of the endowment to the recipient.[11] 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.[12]

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".[13][14] 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.[15]

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.[16]

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

1. Dictators' utility functions include only money that they receive and dictators fail to maximize it.
2. Dictators' utility functions may include non-tangible harms they incur (for example self-image or anticipated negative views of others in society), or
3. 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.[17] 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 recipient's welfare and not only their own welfare. This is the core of the "other-regarding" preferences. A number of experiments have shown donations are substantially larger when the dictators are aware of the recipient's need of the money.[18][19] 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.[20][21][22][23] Regarding altruism, recent papers have shown that experimental subjects in a lab environment do not behave differently than other participants in an outside setting.[24] Studies have suggested that behavior in this game is heritable.[25][26]

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 exception 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.[27][2]

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 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 other 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.[28]

The Trust Game is similar to the dictator game, but with an added first step. In the trust game, one participant first decides how much of an endowment to give to the second participant. The first player is also informed that whatever they send will be tripled by the experimenter. Then the second participant (now acting as a dictator) decides how much of this increased endowment to allocate to the first participant. Thus the dictator'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). The experiments rarely end in the subgame perfect Nash equilibrium of "no trust". 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.[29]

A variation of the dictator game called “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”.[15]

• Impunity game
• Neuroeconomics
• Ultimatum game
• Prisoner's dilemma
• Public goods game
• Social preferences

• Haley, K.; D. Fessler (2005). "Nobody's watching? Subtle cues affect generosity in an anonymous economic game". Evolution and Human Behavior. 26 (3): 245–256. doi:10.1016/j.evolhumbehav.2005.01.002. Concludes that people tend to be more generous if there is a picture of a pair of eyes watching them.
• Engel, C. (2011). "Dictator Games: A Meta Study". Experimental Economics. 14 (4): 583–610. doi:10.1007/s10683-011-9283-7. hdl:11858/00-001M-0000-0028-6DAA-8.
• For a recent review of the dictator game in experiments see Angela A. Stanton: Evolving Economics: Synthesis