Social Capital’s Role in the Ultimatum Game

Discrepancies between empirical data and economic theory in ultimatum bargaining have been a subject of interest for over 30 years. Previous experiments have observed individuals walking away from essentially positive profits in these games. My paper adds to the existing body of research and attempts to explain these observations by investigating non-monetary aspects of payoff functions. Since bargaining is as much of a psychological interaction as it is economic, a person's reputation can be at stake the same way that money can. In this study, I use the concept of social capital as a proxy for reputation as it can be more easily measured. Using a simple oneshot ultimatum game, I have produced results in line with the hypothesis that social capital does, in fact, play a role in the formation of utility functions in the ultimatum bargaining game. 1 I would like to thank Vincent Leah-Martin and Michael Kuhn for their guidance in the design of my experiment and survey. I would also like to thank Michael Kuhn and Dr. Maria Candido for their wonderful advice on econometrics and data analysis. Also, for graciously allowing me to experiment on their students, thank you to Dr. Melissa Famulari and Dr. Megumi Naoi. Finally, thank you to Ross Starr for countless hours of great advice and encouragement throughout the process of writing this paper. Strom 2