The dictator's game is an experiment designed to learn how human beings behave when they have the option of distributing or keeping an amount of money. This experiment is very basic and is often used in combination with others.
In the field of psychology, it is common to find experiments to find out how people think or how they react to certain circumstances.
Likewise, in the world of economics, experiments are also used to find out if the economic policies designed can be successful and achieve the objective for which they are carried out.
The dictator's game and ultimatums
The experiment we explain below is a simplified version of the ultimatum game, related to neuroeconomics.
In the ultimatum game, two subjects are selected to each play a different role.
First, we will have the one known as the proponent. Its function is to make a proposal to the other player. On the other hand, we will have the recipient, who is in charge of accepting or rejecting the proposal that he has received.
In this sense, the proponent is offered a certain amount of money. With this money you have two options: keep it or distribute it in the way you prefer. When the recipient receives the proposal, he or she can accept it and the distribution is made, or they can reject it. In this case, neither player will receive any money.
The game assumes that when rational players participate, the recipient will accept as they will win to a greater or lesser extent. On the other hand, if the proposer abuses his position and raises a disproportionate distribution, the recipient can reject the proposal and both players lose.
In the case of the dictator game, the option to reject the proposal is removed. This game is focused on knowing if the player is greedy or generous. In this case, the proponent, now known as a dictator, is offered an amount of money that he can manage however he wants.
Dictator game example
Suppose we give $ 30 to the dictator. As there is no type of negotiation, the dictator will be able to distribute them equally, which would mean $ 15 for each player, or disproportionately, keeping a greater part of the money.
Another aspect to take into account is the information that the recipient may receive. Let me explain, it is not the same that the amount of money at stake is public as it is private. If both parties know that $ 30 is delivered, the dictator will probably make a more equitable distribution.
This game has received criticism arguing the lack of utility it can have due to how simple it is. Even so, it allows us to draw conclusions about whether people's behavior is selfish or altruistic.
In conclusion, the dictator's game is a simplified economic and psychological experiment whose objective is to know how a subject behaves under the premise of giving him an amount of money and that he can choose whether to keep it or distribute it.