Experiment 4 Dictator Game
Learning objectives
This activity will take your students to concepts mentioned in units 3 and 4. Some of them are:
Key concepts
- Altruism
- Revealed preferences
- Marginal utility
Introduction
Is it required a coercive mechanism for humans to share resources with others? Do people take advantage of their situation whenever it’s possible? The answer to these questions may illustrate a lot about human nature.
Individuals have an associated utility for each quantity of goods they get. Usually, an increase in the consumption good leads to an increase in utility (smaller increase for higher levels of goods) (Unit 3.2). This means that individuals tend to prefer bigger amounts of goods. However, increasing own benefits may reduce those of others. Even more, sometimes people are willing to assume a cost to help others. This is called altruistic preferences (Unit 4.4). Lab experiments try to study the order of individual preferences by observing human behavior. This method is called revealed preference study (Unit 4.8).
The present experiment exposes an individual to a direct interaction with another person. Decisions made by a subject affect the state of the other member of its pair. The person has to decide how much to reduce its utility not to affect the other’s. Theory proposes that a person will get as much as it can whenever there are no consequences over its benefits.
