Social value orientations and the strategic use of fairness in ultimatum bargaining

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Abstract

One of the main issues in research on ultimatum bargaining is whether bargainers are motivated by self-interest or by a concern for fairness. It is difficult to distinguish between both motivations, because it may be in the own interest to make fair offers. In the current paper on ultimatum bargaining, it is investigated whether bargainers are truly motivated to be fair, or whether they merely strategically use fairness as a means to increase their own outcomes. The results of two experimental studies indicate that social value orientations play an important role: strategic use of fairness is mainly displayed by proselfs.

Introduction

Theorizing on motivated bargainer behavior suggests that bargainers may be motivated by a concern for their own outcomes and by a concern for the outcomes of the other parties involved (see e.g., the dual concern model, Pruitt & Carnevale, 1993). More specifically, it has been argued and demonstrated that in bargaining two motives stand out: self-interest and fairness (e.g., Blount, 1995; De Dreu, Lualhati, & McCusker, 1994; Handgraaf, Van Dijk, Wilke, & Vermunt, 2003; Loewenstein, Thompson, & Bazerman, 1989; Messick & Sentis, 1985; Van Dijk & Vermunt, 2000). The question of whether bargainers are mainly motivated to further their own interest or whether they primarily are concerned with fairness has stimulated much research. An important tool to study these differential motives in the context of bargaining, is the ultimatum bargaining game, developed by Güth, Schmittberger, and Schwarze (1982). In the ultimatum bargaining game, two players have to decide on how to distribute a certain amount of money. One of the players, the allocator, offers a proportion of the money to the other player, the recipient. If the recipient accepts, the money will be distributed in agreement with the allocator's offer. If the recipient rejects the offer, both players get nothing.

If bargainers are only motivated to maximize their own outcomes, allocators should offer the recipients the smallest amount possible greater than zero. After all, if recipients only care for their own outcomes they should accept any offer greater than zero, reasoning that accepting the smallest offer yields them higher outcomes than the alternative of rejecting the offer and receiving nothing. The simple structure, and the fact that game-theoretic predictions are very clear, makes the ultimatum game an attractive tool to assess the relative importance of self-interest and fairness considerations (see e.g., Blount, 1995; Boles & Messick, 1990; Larrick & Blount, 1997; Van Dijk & Vermunt, 2000).

The main focus of prior research on the ultimatum bargaining game has been to investigate whether bargainers in general are more motivated by self-interest or by fairness. Early studies suggested that fairness carries great weight. This conclusion was largely based on the observation that allocators generally proposed an equal distribution (i.e., a 50–50 split) of the money (see for overviews e.g., Camerer & Thaler, 1995; Thaler, 1988).1

Indeed, preferences to divide outcomes equally can be explained on the basis of, for example, equity theory (Adams, 1965; Messick & Cook, 1983; Walster, Berscheid, & Walster, 1973; Walster, Walster, & Berscheid, 1978). According to equity theory, people prefer outcomes to be distributed in proportion to their inputs. In the case of equal inputs—the standard situation in research on ultimatum games—people are expected to prefer an equal distribution of the outcomes. However, subsequent studies have suggested that this behavior may reflect strategic and selfish behavior on the part of the allocator. That is, in an ultimatum game it may be in the own interest to offer an equal split if one fears that the recipient will reject unfair offers. To investigate this possibility, research has also employed experimental paradigms that reduced the fear of rejection. For example, Van Dijk and Vermunt (2000, experiment 1) designed an ultimatum game in which bargainers had to divide 100 chips that were worth twice as much to the allocator than to the recipient. In half of the conditions the allocators were informed that the recipient knew about this differential value. In these conditions, allocators tended to compensate for the differential value, by frequently offering twice as many chips to the recipient than to themselves. In the other half of the conditions, however, the allocators learned that the recipient did not know about the differential value. In this case, there appears to be a simple way for the allocator to end up with more money. Because the recipient does not know about the differential value, one can offer to split the chips equally—a seemingly fair offer—without much fear of rejection. An equal split of the chips may seem fair to the uninformed recipient, but it can hardly be looked upon as being truly fair, because it implies that the allocators take off with twice as much money as the recipients do. In agreement with the suggestion that equal offers that were observed in prior studies on ultimatum bargaining may have been motivated by fear of rejection rather than a “true” preference for fairness, results indicated that participants made lower offers if they believed the recipient was not aware of the fact that chips were worth more to the allocator. Similar findings in other bargaining studies (e.g., Boles, Croson, & Murnighan, 2000; Croson, 1996; Kagel, Kim, & Moser, 1996; Pillutla & Murnighan, 1995; Roth & Malouf, 1979; Roth & Murnighan, 1982; Straub & Murnighan, 1995) have led researchers (e.g., Camerer & Thaler, 1995; Pillutla & Murnighan, 2003) to conclude that what has generally been interpreted as fair behavior in the traditional ultimatum game may in fact have been selfish behavior in disguise. That is, positive offers may not be as much a result of “true fairness,” but it may be more appropriate to speak of “strategic fairness.”

This conclusion may be premature, however. In particular, the fact that on average, offers go down in the case of Asymmetric Information, does not necessarily imply that all allocators respond to an information advantage in a strategic manner. It may be that the fear of rejection explanation pertains to some, but not all allocators.2 In the current article, we will try to further elaborate on this issue by relating the fear of rejection hypothesis to current insights about the role of social value orientations in social decision-making.

Social value orientations are individual differences in how people evaluate outcomes for themselves and others in interdependent situations (Kuhlman & Marshello, 1975; Messick & McClintock, 1968). Many orientations can be distinguished, depending on the weight people assign to own and others' outcomes, but most people can be classified as being a prosocial, competitor, or individualist (Van Lange, 1999). Prosocials tend to strive for maximizing joint outcomes and equality in outcomes. Individualists seek to maximize their own outcome, regardless of other's outcome. Competitors are motivated to maximize the difference between outcomes for self and other. These latter two—individualists and competitors—are usually taken together and defined as proselfs (Van Lange & Kuhlman, 1994), because they both assign a higher weight to the own outcomes than to the outcomes of others.

In this article, we investigate whether the conclusion that positive offers reflect selfish behavior (i.e., positive offers are mainly the result of strategic considerations such as fear of rejection) should be qualified or not. It may be that social value orientations may distinguish between the two types of fairness that may play a role in bargaining, i.e., “true fairness” and “strategic fairness.” In particular, we will investigate the possibility that the “fear of rejection explanation,” which accounts for positive offers in the traditional ultimatum game (i.e., the game in which both the allocator and recipient possess the same information), mainly serves to explain the behavior of proselfs. To examine this possibility we designed two experimental studies in which we related allocations made by allocators during ultimatum bargaining to their social orientations.

Section snippets

Experiment 1: What if you do not know what i know?

To investigate whether proselfs are more willing than prosocials to take advantage of the poor information level of recipients, we designed an ultimatum game in which we manipulated information level, and assessed the participants' social value orientation. Concentrating on allocator behavior, participants were assigned the allocator role, and they were informed that chips were worth twice as much to them as to the recipient (see for similar manipulations of information e.g., Boles et al., 2000

Experiment 2: What if you are too weak to really hurt me?

The results of Experiment 1 indicated that proselfs lower their offers if they feel the recipient lacks the information to assess whether the offer is unfair. These results support the notion that in ultimatum bargaining, seemingly fair offers may be made out of fear of rejection. Note, however, that the inability of the recipient to assess whether an offer is unfair may not be the only condition that can free proselfs from their fear of rejection. Even if the recipient is fully aware that she

General discussion

Taken together, the results of the two studies presented here suggest that the “fear of rejection” explanation of fair offers (ultimatum) bargaining, can mainly serve to explain the behavior of proselfs, and not the behavior of prosocials. It therefore seems appropriate to complement Camerer and Thaler's (1995) conclusion that “self-interested behavior is alive and well, even in ultimatum games” with the notion that “other-interested” behavior is not ready to be buried either.

With the current

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