Economics and Finance


An Aspirations Model of Decisions in a Class of Ultimatum Games

Authors: Ramzi Suleiman

We propose a novel model of aspiration levels for interactive games, termed economic harmony. The model posits that the individuals' levels of outcome satisfaction are proportional to their actual outcomes relative to their aspired outcomes. We define a state of harmony as a state at which the interacting players' levels of outcome satisfaction are equal, and underscore the necessary condition for the manifestation and sustenance of harmony situations on the behavioral level. We utilize the proposed model to predict the transfer decisions in a class of two-person ultimatum games, including the standard ultimatum game, an ultimatum game with asymmetric information about the size of the "pie", an ultimatum game with varying veto power. We also apply the model to predicting behavior in a three person ultimatum game with uncertainty regarding the identity of the recipient and in a sequential common pool resource game. For all the aforementioned games, we show that the model accounts well for large sets of experimental data, and with the predictions of game theory and other relevant models of interactive situations. Strikingly, for the standard ultimatum game, the model predicts that the allocator should transfer a proportion of the entire sum that equals 1- Φ, where Φ is the famous Golden Ratio, most known for its aesthetically pleasing properties.

Comments: 35 Pages.

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Submission history

[v1] 2014-12-08 16:29:25

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