Learning principles of fair division is a part of growing up. When it comes to sharing cakes, chocolate bars and sticks of rock (an important part of childhood) there is a time honoured strategy that guarantees fairness between even the most warring of siblings: one gets to make the division, the other gets to choose between them. The one making the cut is motivated to make a 50/50 split. If the split is not even, the chooser will take the bigger portion.
Understanding how we behave when dividing things can tell us much about fairness. It even gives us a way to ask ourselves the price we put on fairness. Economists have spent many years investigating what is known as the Ultimatum Game.
The Ultimatum Game has two players. They must split a sum of money under certain rules. The first player proposes a split. The second player can accept this split, in which case each player receives the portion due. However, the second player can also reject the split. In this case both players receive nothing.
If a player’s only objective was gain logic dictates accepting any split. Even only 1% of the pot is still something. We always gain more by choosing something over nothing. However, people are often willing to receive nothing. That is why the Ultimatum Game can put a price on fairness.
Boring as it is for Economists many people propose a 50/50 split (which is nearly always accepted). Things become interesting when the proposer gambles that something is better than nothing and proposed an unequal split. Considering what we would do under these circumstances tell us, literally, the price we put on fairness.
Consider playing the game with a £10 pot. Ask yourself if you would accept £4 out of ten? It’s not entirely equitable, but it’s not terrible either. Many would. £3 out of the ten? Maybe. £2? Probably not. At this point £2 is a price worth paying to say the deal is not fair – even though it means getting nothing.
Would the size of the pot change our behaviour? No-one has played a ‘live’ multi-million pound Ultimatum Game (academic funding being what it is) but coming into a million pounds would feel bittersweet if we knew it was the thin-end of a £10 million pound wedge. From childhood cake-cutting to division of multi-million pound spoils we learn that how something is gained can colour even the sweetest of gains.
Nick Southgate is a faculty member of The School of Life. He wil be leading 'How To Be Cool' running on Tuesday 22 June.
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