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Journal of Economic Perspectives-
9
2
Spring 1995
-Pages 209-219
Anomalies Ultimatums, Dictators and Manners
Colin Camerer; Richard H Thaler
Economics can be distinguished from other social sciences by the belief that most (all?) behavior can be explained by assuming that agents have stable, well-defined preferences and make rational choices consistent with those preferences in markets that (eventually) clear. An empirical result qualifies as an anomaly if it is difficult to "rationalize" or if implausible assumptions are necessary to explain it within the paradigm. This column will resume, after a long rest, the investigation of such anomalies.
Why study anomalies? What is the purpose of detailed explorations of the failures of economic theory? Some people believe that the main goal is to annoy dogmatic economists. While conceding the pleasure to be achieved in this vein, the investigation of anomalies does have a loftier goal: providing concrete evidence that will help develop economic theory. Like a doctor poking around for sensitive spots, the point of the exercise is to assist the patient, rather than to inflict pain. To this end, it may be useful to revisit occasionally a topic previously discussed in this space to see how the patient is doing. In this spirit, the first installment of the reborn series returns to the ultimatum game, as discussed in the Fall 1988 issue of this journal. Future installments will take on new topics, and suggestions are always welcome. Write to Richard Thaler, c/ o Journal of Econontic Perspectives, Sloan School of Management, E52-555, MIT, Cambridge, MA 02139, or [email protected].
Colin Camerer is Axline Professor of Business Economics at the California Institute of Technology, Pasadena, California. Richard Thaler is H. J. Louis Professor of Economics, Johnson Graduate School of Management, Cornell University, Ithaca, New York. At the time this was written, Thaler was on leave al the Massachusetts Institute of Technology, Cambridge, Massachusetts.
Introduction The ultimatum game could not be simpler. Two players are allotted a sum
of money. The first player, now often called the Proposer, offers some portion of the money to the second player, called the Responder. If the Responder accepts, she gets what was offered, and the Proposer gets the rest. If the Responder rejects the offer, both players get nothing. This...