Let’s say that you’re negotiating with someone about how to split a sum of money that you both can rightly claim, but that the other person, regrettably for you, has in his possession. You have one opportunity to make the deal, and the other person is not obligated to keep negotiating with you after this.
Since he has the upper hand, the person you’re negotiating with says that he thinks a 70-30 split is fair, with 70% going to him. If you accept his terms, you get 30% of the money. If you reject his terms, you get 0. You believe the terms to be unfair, but if it’s the difference between 30% and nothing, you’ll take the 30%, right?
Maybe not. Instead, you might reject the offer as a symbolic way of expressing your anger and take the opportunity to tell the unfair dealer exactly what you think of him, money be damned.
Ok. But now imagine that you’re negotiating with someone who has been informed that she can unilaterally decide how much of the money to give you and you have no say in the outcome. In other words, as far as she’s concerned, she can dictate the amount and she doesn’t care what you decide – in fact, she’ll never even know. On your side of the deal, however, all you know is that you are going to be offered a sum of money just as you were in the first deal, and you can choose to reject or accept it. You cannot, however, discuss the deal with the other person and voice whether you believe the deal to be fair or unfair – you have no recourse.
So once again you are offered 30% of the money, and this time not only are you faced with 30% or nothing, but you’re also denied the satisfaction of telling the unfair dealer off or even symbolically protesting. This time it seems clear — you take the money, right?
Once again, quite possibly not. But why not? You have no chance of trying to make the deal fairer, and no opportunity to express your disgust, so what’s making you still turn down the money?
That’s what a remarkable new study published in the Proceedings of the National Academy of Sciences investigated. Participants were made to play both of the game scenarios above; the first is called the Impunity Game, a variation of the Ultimatum Game. In the Ultimatum Game, a proposer is given a sum of money and told to negotiate with a responder on how to split the amount. The responder has two options: (1) accept the amount proposed and both parties get the agreed upon amount of money, or (2) reject the amount proposed, and neither party gets any money. The typical result of this game is that most unfair offers are rejected and the parties commonly agree to a 50-50 split.
In the Impunity Game, the responder can still reject the offer, but by doing so also loses any claim to the money. It’s a “take x% or nothing” deal. The typical results of this game are that between 30 – 40% of responders reject the offer in a show of symbolic punishment against the unfair party. The responder forfeits the cash, but still says her peace.
The final variation is called the Private Impunity Game (the second imaginary scenario above) in which the proposer is told that he can simply dictate the amount to be given to the responder. The responder, however, is told that she can still reject the offer but the proposer will never know what decision she made. In this case, the predicted result is that nearly all participants will act rationally and take the money, since they have no chance of recourse, and no chance to make the proposer aware of their disgust.
That’s the prediction, but surprisingly it turns out not to be true. The rejection rate of unfair offers is still a hefty 30 – 40%.
The reason suggested by this study is, in a word, emotion. When faced with an unfair offer, we have the choice of rationally accepting the immediate incentive and ending the dispute, or allowing an emotional response to dominate. We respond emotionally to unfair treatment for the same reason that a bear charges someone intruding on its territory. Because we know that a bear will act aggressively if it feels challenged, we avoid bears. Same dynamic applies to us: if someone is known to emotionally respond with anger and moral outrage to unfair treatment, she develops a reputation as someone to avoid crossing.
What this study tells us is that not only are we concerned with consistency in our external reputations, but we’re just as much, if not more, concerned with internal consistency. Our emotional response guards against accepting immediate incentives that compromise our integrity. Over time, this internal consistency that preserves integrity also preserves external reputation, so it’s a hand-in-hand relationship.
To put this all another way, our emotional response can save us from selling out.