Group formation is a fundamental activity in human society. Humans often exclude others from a group and divide the group benefit in a fair way only among group members. Such an allocation is called in-group fair. Does natural selection favor an in-group fair allocation? We investigate the evolution of fairness and group formation in a three-person Ultimatum Game (UG) in which the group value depends on its size. In a stochastic model of the frequency-dependent Moran process, natural selection favors the formation of a two-person subgroup in the low mutation limit if its group value exceeds a high proportion (0.7) of that of the largest group. Stochastic evolutionary game theory provides theoretical support to explain the behavior of human subjects in economic experiments of a three-person UG.
|By:||Breinbjerg, Jesper (Department of Business and Economics)
Sebald, Alexander (Department of Economics)
Østerdal, Lars Peter (Department of Business and Economics)
We consider a class of three-player queuing games where players independently choose when to arrive at a bottleneck facility that serves only one at a time. Players are impatient for service but cannot arrive before the facility opens and they dislike time spent in queue. We derive the equilibrium arrivals under the first-in-first-out (FIFO), last-in-first-out (LIFO), and service-in-random-order (SIRO) queue disciplines and compare these equilibrium predictions to outcomes from a laboratory experiment. LIFO provides higher equilibrium welfare than FIFO and SIRO since the players arrive such that lower congestion is induced. Experimental evidence confirms that employing different queue disciplines indeed affects the strategic behavior of players and thereby the level of congestion. The experimental participants do not, however, behave as prescribed by the equilibrium predictions. They obtain significantly higher welfare than prescribed by equilibrium under all queue disciplines. Our results moreover suggest that people perceive LIFO as the most unfair of the three disciplines although the theoretical results suggest that it is welfare optimal.
|Keywords:||Queue disciplines; congestion; equilibrium; experiments; fairness|
|JEL:||C72 D62 D63 R41|