Examples of
Laboratory Experiments
•Ultimatum/Dictator Game
•Public Goods Game
BPV_IEBE  Introduction to Experimental and Behavioral Economics
3.3. 2016

Ultimatum Bargaining Game
§Original: Güth, Werner, Rolf Schmittberger, and Bernd Schwarze. "An experimental analysis of
ultimatum bargaining." Journal of economic behavior & organization 3.4 (1982): 367-388.
§Two players (proposer and responder) bargain over a division of a given sum of money.
1.proposer: makes an offer how to split the sum
2.responder: accepts or rejects
•if accepted they split the money
•if rejected neither gets anything
§unique subgame perfect equilibrium the proposer suggests the responder the smallest amount
possible and the responder accepts
BPV_IEBE  Introduction to Experimental and Behavioral Economics
1

Dictator Bargaining Game
§Original: Kahneman, Daniel, Jack L. Knetsch, and Richard H. Thaler. "Fairness and the assumptions
of economics." Journal of business (1986): S285-S300.
§Two players (dictator and recipient) bargain over a division of a given sum of money.
1.dictator:  splits the sum
2.recipient:  is informed of endowment left by the dictator
3.
§unique subgame perfect equilibrium: the dictator takes it all
§More about Ultimatum and Dictator Games in week 9 and 10
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BPV_IEBE  Introduction to Experimental and Behavioral Economics
2

Public Goods Game
§Original Marwell, Gerald, and Ruth E. Ames. "Experiments on the provision of public goods. I.
Resources, interest, group size, and the free-rider problem." American Journal of sociology (1979)
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§One of the most standard game in experimental economics.
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§Each player contributes to common or private account. Usual:
§Each player gets same percentage of total private account contributions.
§Contributions are multiplied by a coefficient >1.
§
§The group's total payoff is maximized when everyone contributes all of their tokens to the public
pool.
§
§Game equilibria is zero contribution by every player.
§But experimental results show a different story.
§
§Those who do not contribute are called free riders.
BPV_IEBE  Introduction to Experimental and Behavioral Economics
3

Public Goods Game
§Applicable on charitable giving, fundraising, transportation etc.
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§Large contributions to public economics theory.
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§Addaptions:
§Opened communication in the middle of the experiment.
§Possibility of punishment.
•People do punish (¯contribution => punishment) and cooperation incereases (Fehr Gächter, 2000)
•“Counter fire“ lowers cooperation (Nikiforakis, 2008)
•Stronger punishment increases contributions (Denant-Boemont, 2007)
•Anonymous punishment is more efficient (Denant-Boemont, 2007)
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§More about Public Goods Game in week 7 and 8
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BPV_IEBE  Introduction to Experimental and Behavioral Economics
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