Evaluating Conclusions from Economic Behavior
An economist conducts an experiment in two different communities, Community X and Community Y. In the experiment, one person (the 'Proposer') is given $100 and must offer a portion of it to a second person (the 'Responder'). If the Responder accepts, the money is split as proposed. If the Responder rejects the offer, both individuals receive nothing.
The results are as follows:
- Community X: Proposers most frequently offered 40-50% of the total sum. Responders in this community were observed to reject almost any offer below 40%.
- Community Y: Proposers most frequently offered 10-20% of the total sum. Responders in this community were observed to frequently accept offers as low as 10%.
Based on these results, the economist concludes: 'The behavior of the Proposers proves that people in Community X are inherently more altruistic and have a stronger preference for fairness than people in Community Y.'
Critically evaluate the economist's conclusion. Is this conclusion fully supported by the data? Justify your position by analyzing the potential motivations of the Proposers in both communities, considering the behavior of the Responders they faced.
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In an economic experiment, a 'Proposer' is given $100 and must offer a portion of it to a 'Responder'. If the Responder accepts the offer, the money is split as proposed. If the Responder rejects the offer, both individuals receive nothing. The experiment is conducted with two distinct populations, Group A and Group B. The results show two key patterns:
- Proposers from Group A consistently make more generous offers (e.g., $40-$50) than Proposers from Group B (who often offer $10-$30).
- Responders from Group A are very likely to reject any offer below $40, while Responders from Group B frequently accept offers as low as $10.
Given this information, what is the most likely reason that a purely self-interested Proposer from Group A would make a high offer?
In an economic game where one person (the 'Proposer') offers a share of a sum of money to another (the 'Responder'), the observation that Proposers from a particular group consistently make high offers is, by itself, sufficient proof that this group values fairness more than a group whose Proposers make low offers.
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In an economic experiment, a 'Proposer' offers a share of a sum of money to a 'Responder'. If the offer is rejected, neither person gets anything. The experiment was run with two separate populations: Population 1 and Population 2. Match each Proposer's typical strategy to the most likely underlying reason for that strategy, based on the behavior of Responders in their respective populations.
Evaluating Conclusions from Economic Behavior
In an economic game where a 'Proposer' offers a share of a sum of money to a 'Responder', a Proposer who is motivated solely by maximizing their own financial gain will calculate their offer by considering the potential payout of each possible split, weighted by the probability that the Responder will ____ that offer.
A 'Proposer' in an economic game is deciding what portion of a sum of money to offer a 'Responder'. The Proposer's only goal is to maximize their own financial gain. They know that Responders in their community are very likely to reject low offers, meaning both parties would get nothing. Arrange the following steps in the logical order that this purely self-interested Proposer would follow to decide on their offer.
Analyzing Proposer Behavior in an Economic Game
In an economic game, a 'Proposer' has $100 to split with a 'Responder'. If the Responder rejects the offer, both get $0. The Proposer is purely self-interested, aiming only to maximize their own financial gain. The Proposer is considering two possible offers based on their knowledge of how Responders in their community typically behave:
- Offer A: Offer $20 to the Responder. The Proposer anticipates this has a 50% chance of being rejected.
- Offer B: Offer $40 to the Responder. The Proposer anticipates this has a 10% chance of being rejected.
Which offer should the Proposer make, and what is the correct reasoning?
Figure 4.18b: Actual Offers and Expected Rejection Proportions
Strategic Risk Aversion as an Explanation for Kenyan Farmers' High Offers
Figure 4.18a: Distribution of Offers Made by Proposers