Behavioural And Experimental Economics Workshop Day -2

We started the second day of the Behavioural Economics workshop by refreshing our minds with some economics-related questions that paved the way for this session. Savita Kulkarni ma’am led the experiments for the day. The questions were meant to get an understanding of why people do what they do- right from why people donate blood to anonymous people to why people stop and spare some time in telling addresses to a stranger on the road. The reasons include doing it for the ‘pleasure of doing good’ and trying to give back to society, among others.

We then played the Ultimatum Game where Savita ma’am formed anonymous pairs of two and asked one participant (the proposer) to split 300 rupees by making an offer to their partner(the responder). If the responder accepts the offer, they get the money and the proposer gets what remains; if they reject it then both the players earn nothing. The game concluded by showing different results on how the responders reacted to every offer, the reactions depending on the participant’s level of fairness. If the proposer offers a minimum of 1 rupee, it would be the best deal for the responder as the other option would be to earn nothing. When respondents did not know the amount, proposers offered (and respondents accepted) significantly lower offers than when the respondents knew the amount. 

The second game was ‘The Dictator Game’. It was very similar to the Ultimatum game although this time the responder did not have the right to reject the offer made by the proposer. Thus the proposer had no fear of rejection and the offer made was final. In theory, because of no fear of rejection, the proposer must keep all the money to themself. However, the experiment disproved this at times. Factors such as ‘Altruism’ resulted in a few positive transfers towards the responder. When the identity of the proposer was hidden, 79% of the proposers transferred nothing and when the identity of both the responder and proposer was hidden, the same percentage went up to 95%. From the experiment, it was concluded that women gave twice as much as men did to their anonymous partners.

The last game was the Trust Game. Here, the proposer chose an amount, which was tripled by the experimenter and transferred to the responder. The responder then has the option to send back the money. The identity of both the responder and the proposer is hidden. The results of the experiment showed that the proposer transferred 50% of the money and the responder too transferred approximately 48% back. Proposer exhibits trust that their unknown partners will reciprocate and responders honor the proposer’s trust and return some money. It was found that men are likely to trust and send a higher amount compared to women. Women send less (63%) than men (79%). 

In conclusion, the second day of the Behavioural and Experimental Economics workshop was a blast- and the idea of choosing to gamify the learning rather than just lecturing or showing a presentation helped in understanding the concepts and their applications better.