Sunday, January 11, 2015

Equity and Experience: "Fairness" as Rationality?

The role of self-interest in elite bargaining 

Brad LeVeck et al.
Proceedings of the National Academy of Sciences, 30 December 2014, Pages 18536-18541

Abstract: One of the best-known and most replicated laboratory results in behavioral economics is that bargainers frequently reject low offers, even when it harms their material self-interest. This finding could have important implications for international negotiations on many problems facing humanity today, because models of international bargaining assume exactly the opposite: that policy makers are rational and self-interested. However, it is unknown whether elites who engage in diplomatic bargaining will similarly reject low offers because past research has been based almost exclusively on convenience samples of undergraduates, members of the general public, or small-scale societies rather than highly experienced elites who design and bargain over policy. Using a unique sample of 102 policy and business elites who have an average of 21 y of practical experience conducting international diplomacy or policy strategy, we show that, compared with undergraduates and the general public, elites are actually more likely to reject low offers when playing a standard "ultimatum game" that assesses how players bargain over a fixed resource. Elites with more experience tend to make even higher demands, suggesting that this tendency only increases as policy makers advance to leadership positions. This result contradicts assumptions of rational self-interested behavior that are standard in models of international bargaining, and it suggests that the adoption of global agreements on international trade, climate change, and other important problems will not depend solely on the interests of individual countries, but also on whether these accords are seen as equitable to all member states.

1 comment:

  1. While admitting I have not read the full article, I will nonetheless assert that I find the results somewhat dubious or, at least, not attributable to "irrationality" or "non-rationality" per se.

    The article would seem to imply that people become more "non-rational" after leaving college (God help us!). I would need a theory about this and I don't see one posited in the abstract.

    Second, it could be very possible that rejecting high offers in Ultimatum is rational from a diplomat's point of view as you are signaling reputation. I'm guessing all the individuals involved have been involved in some iterated interactions in their "real" job. Thus, in situations of "cheap talk," it is rational to signal that you are a hard bargainer by turning down seemingly rational offers (take the $1). I am assuming that the experimental design used was pretty much "cheap talk." These diplomats probably develop norms or heuristics to behave as such in such situations.

    Vernon Smith examined Ultimatum game results when the test was "double blinded" -- i.e., the players didn't know each other, and they were assured the experimenter would not know who made what offer. In that case, the offers became more narrowly (thinly) rational. Interesting. The idea was that the two players were not only worried about what the other anonymous person would think, but what the scholar in the lab coat thought about them. It would be interesting to duplicate Vernon Smith's experiment with these diplomats.


Do you have suggestions on where we could find more examples of this phenomenon?