The ultimatum game, a key experiment showing intrinsic fairness and altruism among strangers

Knowledge will come only if economics can be reoriented to the study of man as he is and the economic system as it actually exists.
Ronald Coase

There is a line of economic research on altruism that get only little attention in the media, which is why I want to report on it here. There is by now solid evidence that humans can behave altruistically towards strangers. This is surprising because a naive version of evolutionary theory would expect that altruism is only possible among kin. It also goes against the basic assumptions of economics, game theory and public choice theory, which all assume that humans only have an eye for their self-interest. These assumptions are often defended referring to evolution by stating that you need to be an unapologetic egoist for optimal reproduction. I mention this, because non-academics may think it is natural to assume humans can be altruistic and wonder why one would research something that trivial.

It is not controversial science. There are hundreds of scientists working on it. Almost every month Nature or Science publishes an article on altruism. And at the University of Bonn, where I work, Reinhard Selten is emeritus professor and got his Nobel price for experimental research on the ultimatum game. That is also how I heard about it, our University Magazine had an article on Selten and this beautiful experiments.

In a social setting, where there is an opportunity to build up a reputation, altruism can be explained. In this case, altruism may lead to future benefits and one may even argue that it is thus not real altruism. However, this type of altruism is expected to break down when a group is under pressure and may soon dissolve, but humans also collaborate under such difficult circumstances. Furthermore, reputation-building naturally does not work under conditions of anonymity, while experiments show that humans also collaborate with strangers they will never see again. Our ability to collaborate with non-kin is an important innovation that contributes much to our success as dominant animals.

Ultimatum game

A very simple and pure economic game, which thus shows the problem very clearly, is the ultimatum game (Güth et al., 1982). In the ultimatum game, two players must divide a sum of money. The first player has to propose a certain division. The second player (responder) can accept this division or reject it; in the latter case both players do not receive any money. In its purest form, the experiment is played only once and anonymously with players that do not know each other.

When the article described the experiment, I wondered what was interesting about that. Naturally people offer 50% and the responder accepts this. Not? That only showed my lack of economic training.