Ultimatum, Human Rationality, and Goal Setting and Goal Attainment

People are irrational, as the game Ultimatum proves.  In Ultimatum, there are two players and a pot of booty.  Each player has total power to make one move, and there is no negotiation. 

The first player gets to propose (only once) how to split the booty among the two players.  The second player gets to accept or reject the offer.  No counter-offers are allowed.  If the second player rejects the offer, both players leave with nothing. 

In theory, the second player should always accept any offer.  After all, he went into the game with nothing.  If he accepts offer, he will leave with something.  Accepting the offer will always make the second player better off.

Of course, the second player does not accept just any offer.  Instead, an offer must be "fair" before the second player will accept it.  How is turning down an offer to become better off rational?  It's not.

Yet does Ultimatum prove that people are irrational?  What if, using higher cognitive processes, a person could learn to accept "unfair" but economically beneficial offers?  What would that say of human rationality? 

On a concrete level, wouldn't you like your decisions to be rational?  I sure would.  Dr. Peter M. Gollwitzer, a expert on goal attainment and human motivation, suggest that we can become more rational. 

In a short paper entitled, "Self-Regulation in Ultimatum Bargaining: Controlling Emotion with Binding Goals," he and his colleagues explain that "participants with a goal to stay calm accepted unfair ultimatums more than participants who were not given such a goal."  The bottom-line result is that when one knows he is about to be offered an "unfair" but economically-beneficial deal, he should set a goal to remain calm.  (That's called a suppression strategy, since the goal is to suppress one's emotion - in this case anger.)

The author hypothesize, however, that there is a better strategy, namely, cognitive reappraisal.  Cognitive reappraisal "is defined as a reconstrual of an emotional stimulus, in a way that significantly lessens the unwanted emotional impact."  In other words, accentuate the positive.  Don't say, "This deal is unfair because it undervalues my work."  Instead, think, "This is an opportunity for me to increase my revenues by 15%." 

In terms of New Year's Resolutions: Don't suppress the urge to eat a chocolate-chip cookie.  Instead, reappraise it.  "Turning down this cookie will allow me to look better in a swimsuit."

The entire paper (8 pages, double-spaced) is available for download here.

Comments

[KipEsquire]

On a concrete level, wouldn't you like your decisions to be rational?

The problem with that framing is the innuendo that the opposite of "rational" is "irrational." But outside of neoclassical economics and game theory, the opposite of "rational" is often simply "human."

There is no basis for elevating neoclassical economic "rationality" (i.e, expected utility maximization) to the highest, indeed the only, human endeavor.

Indeed, many if not all of the most anti-libertarian atrocities in history can be directly traced to elevating "rationality" above all other concerns.

[Mike]

Great point.

Is it rational, e.g., to turn down a deal that makes you better off economically if it makes you feel good? Well, why the hell not? How much money do we spend making ourselves feel good? That's all movies and other leisure activities are concerned with. We pay money to feel pleasure and no economist blinks or calls us irrational.

If someone offered me $2 out of $20 of "free money," it'd be worth it to me to miss out on that $2 in order to stick it to the greedy asshole.

The point I would have made if I spent more times on post would be: If it's worth it to you to stick it to someone, sure, go ahead. But make sure it's really worth it.

But it's not rational to make a decision that gives one a short-term buzz and doesn't consider longer-term outcomes.

[EscapedWestOfTheBigMuddy]

It _is_ rational to discourage unfairness (even at some cost to oneself) in small groups where there is a near guarantee of another round. It is also rational to discourage unfairness at some cost to oneself if you have some confidence that the majority of those around you would do the same.

And people take the long view. It seems to be built in.

[Niko]

It is rational to reject an offer that rewards negative behavior in individuals participating in the same social unit. Rationality does not only extend to personal material utility but also includes influencing aggregate communal behavior.