Key terms
- Altruism
- Altruism is acting to help other people at a cost to yourself, with no expectation of any reward in return.
- Self-interest
- Self-interest is choosing whatever brings the most benefit to yourself, the assumption traditional economic theory makes about how people behave.
Fairness and the game that tests it
Can you name the two ideas behavioural economists use to ask whether people care how a gain is shared?
A sense of fairness is about how a gain is split, and it can lead people to turn money down.
Definition
Perceptions of fairness are people's judgements of whether a share or a deal is just, which can lead them to refuse a gain they think unfair.
Can you think of an example?
Example
Offered £2 of a £10 bonus pot her manager controls, a worker turns it down, preferring nothing to a share she sees as an insult.
Definition
The ultimatum game is an experiment in which one player proposes how to split a sum and the other accepts, or rejects so that neither gets anything.
Can you think of an example?
Example
The proposer offers £3 of a £10 pot. If the responder accepts, she gets £3 and the proposer £7; if she rejects, both get nothing.