Gift Giving at the Holidays

This is the holiday season. We know we are supposed to feel charitable. But, sometimes we don't, especially when we think someone has taken monetary advantage of us. As it turns out, our response is not mean spirited - it's only human.

If offered two dollars for free, with no strings attached most people would gladly accept. After all, they have nothing to lose and everything to gain. But if the offer was phrased differently, even if the individuals would still receive two dollars free, the answer will not be positive as often. This is when humans play the “ultimatum game."

In this scenario, one person is the allocator of “found money,” so to speak. That is cash given to him by the researcher. He can choose how he will share it with the other player, the responder. If he divides the money in a way that his counterpart thinks is suitable, and thereby accepts, they can both keep the cash. However, if the responder does not think the division is equitable enough, he may reject the money, in which case neither person keeps anything.

Of course, this is irrational behavior, because both would be getting something even if the allocator only gave the responder one cent out of $10. Not only does this not happen, but when the responder is offered 20% or less of the money he will reject it 50% of the time. The refusal rate increases as less is offered.

Inequitable money arrangements tend not to work

Alan G. Sanfey and his colleagues were pioneering investigators in the ultimatum game, the scenario just described. It tests responses to fairness. The researchers used the game in conjunction with functional magnetic resonance imaging (FMRI) to determine what parts of the brain are activated when monetary unfairness is perceived. FMRI measures blood flow changes related to neural activity.

Sanfey was at the Center for the Study of Brain, Mind and Behavior, Princeton University, Princeton, N.J., when the initial studies were performed. His group found that “unfair offers elicited activity in brain areas related to both emotion (anterior insula) and cognition (dorsolateral prefrontal cortex).”

What the test proved was that a sense of unfairness can make a normal human act irrational in regard to money. A rational person would take what he can get free since he has nothing to lose.