Expectations in the Ultimatum Game: Distinct Effects of Mean and Variance of Expected Offers

Peter Vavra, Luke J. Chang, Alan G. Sanfey

Being treated fairly by others is an important need in everyday life. Experimentally, fairness can be studied using the Ultimatum Game, where the decision to reject a low, but non-zero offer is seen as a way to punish the other player for an unacceptable offer. The canonical explanation of such behavior is inequity aversion: people prefer equal outcomes over personal gains. However, there is abundant evidence that people's decision to reject a low offer can be changed by contextual factors and their emotional state, which cannot be explained by the inequity aversion model. Here, we expand a recent alternative explanation: rejections are driven by deviations from expectations: the larger the difference between the actual offer and the expected offer, the more likely one is to reject the offer. Specifically, we provided participants with explicit information on what kind of offers to expect using histograms depicting distribution of offers given in a previous experiment by the same proposers. Crucially, we showed four different distributions, manipulating both the mean and the variance of these expected sets of offers. We found that 50% of our participants clearly and systematically changed their behavior as a function of their expectations (11% followed the standard-economic model of pure self-interest and 39% where not distinguishable from the inequity-aversion model). Using a logistic mixed-model analysis, we found that the mean and variance differently affect the decision to reject an offer. Specifically, the mean expected offer affected the threshold of what offers are acceptable, while the expected variance of offers changed how strict participants were about this threshold. Together, these results suggest that social expectations have a more complex nature as current theories propose.