Choices in Two-Person Interactions: The Effect of Amount and Social Distance on Offers in the Dictator and Ultimatum Games

Proposers in the Dictator Game and the Ultimatum Game often do not act as normative economic theory predicts. Offers are frequently higher than what would be considered income maximizing. The present study investigates two effects on the amount offered by the proposer. The first is whether the initial amount provided to the proposer systematically affects the amount offered (a magnitude effect). The second is whether the social distance between the proposer and responder influences the amount offered (the social distance effect). Three amounts ($10, $3,000, and $250,000) at each of three social distances (2, 20, and 100) are studied under the Dictator Game and the Ultimatum Game. The amount offered is consistently higher under the Ultimatum Game, and the proportion of the amount offered decreases both as the size of the initial endowment increases and as the social distance between proposer and responder increases. The pattern of findings is not differentially affected by demographic factors, including gender, age, education, income, ethnicity, race, religion, political ideology, political affiliation, geographic region, or city size, with the exception of a gender difference in the Dictator Game. Offers made to relatives are higher than those made to non-relatives at a social distance of 2 for the Dictator Game, but are not significantly different for the Ultimatum Game. These results extend the generality of findings with two-person economic games and argue for the importance of amount and social distance in understanding why people fail to conform to normative economic predictions. 1 I would like to thank Professor Leonard Green, my thesis advisor, for his dedication to this project. I also would like to thank Professor Joel Myerson, Professor Bruce Petersen, and Professor Dorothy Petersen for their valuable time and insightful comments.