Anomalies: Ultimatums, Dictators and Manners

The recent research on ultimatum and dictator games is reviewed. New experiments reveal that the ultimatum game is quite robust to changes in stakes and the nationality of the players but dictator games are sensitive to many design features. Information in the ultimatum game is important. Responders will reject offers only if they are known to be proportionally stingy and are known to be chosen by the proposer (rather than picked at random). Much of the observed behavior can be successfully modeled using Matthew Rabin's (1993) notion of a fairness equilibrium, which incorporates manners into economics. In many market contexts, politeness pays.