Winners Curse

1
Winners Curse
2
Game Theory

• Game 9
• Ultimatum Game

3
Equilibrium in Ultimatum

• Simultaneous Game
• Any offer/acceptance that are the same
• Extensive Form Game
• Offer 1, accepted
• Non-monetary payoffs
• Equality
• Fairness
• Spite

4
Experimental Evidence

• Almost all experimental evidence
  points to an even split

5
Very Little Money
Left on the Table

• Average Offer 83
• Average Minimum Acceptance 52
• Average Money On the Table 31
• Extremes
• Offer 0 to 110
• Accept 0 to 100
• 31 of 41 offers accepted (76)

6
Luck Offering End

• Helal
• sent 41 (receiver asked for 1)
• Dorothy Amy
• sent 50 (receivers asked for 0)
• Keisuke (sent 70)
• Yi Pei (sent 80)
• LaDonna (sent 80)
• All other successful offers were at least 89

7
Bad Luck

• LaDonna
• Asked for 50, was offered 0
• Nine others
• Asked for 90, didnt get it

8
Greed Poetic Justice

• Demand for yourself
• more than you offer the other person?

9
Greed Poetic Justice

• Demand for yourself
• more than you offer the other person?
• Aditya
• Sent 80 (rejected
• receiver asked for 90)
• Asked for 90 (received 10)

10
Optimal Strategy

• Profit (200-V) x chance V is accepted

Likelihood of Acceptance
Average Profit
11
Size of the Stakes?

• High stakes games confirm the results
• Easy to reject 4 out of 20
• But if that 4 is a days wage?
• Still reject!
• Spite?