The Ultimatum Game and The Psychology of Impulses

It has been 10 years since that fateful night at the Grammys:

“Imma let you finish but BEYONCE HAD ONE OF THE BEST VIDEOS OF ALL TIME!”

Some say it was a publicity stunt but after hearing Kanye’s own account, it is safe to assume it wasn’t premeditated. Instead, it was driven by the most human of feelings, the unreflective urge to act: impulse.

And when it comes to impulsivity, Kanye is far from alone. From calling up exes, splurging on pizza, or giving an internet troll a piece of our mind, we act on a burst of unchecked emotion which often leaves us with regrettable decisions. When you throw impulse in the mix with purchases, our wallets are left grieving the most.

From saving for a 401k to finally committing to veganism, life is full of small battles fought between impulse and control. One classic experiment explores the “cost” of our impulse: The Ultimatum Game. The game opens an important window into the psychology of decision-making, and its insights can help us to avoid the pitfalls of impulsive shopping.

The Psychology of the Ultimatum Game

Here’s how it works: You and another player are given a sum of money (say $10) to divide between the two of you. One player is randomly designated as the divider—they divide how the sum should be split across you two (e.g., $7 for the divider, $3 for you). The other player is the acceptor—they choose whether or not this is an acceptable bid.

Should the acceptor reject the divider’s bid, neither player gets anything. If she accepts, the money is split accordingly. Moreover, the game is only played once to avoid any sort of scheming to develop across the two players.

Researchers who named it a "game" must have known it was a bit of a stretch. Games are typically fun and social, but the Ultimatum Game is neither.

The dividers have a perplexing situation on their hands. They want to take home as much as possible, but they don’t want to be too greedy for fear that their bid will be rejected and they’ll go home with nothing.

In the Ultimatum Game, participants reliably choose nothing over something

Source: Photo by Sharon McCutcheon on Unsplash

But the Ultimatum Game’s most interesting insights come fro the acceptors’ choice. In theory, we should accept any kind of non-zero bid. For instance, $2 even if our partner gets $8, is still $2. And $2 is still better than $0, making you $2 richer.

But this is not what people do. Not only are dividers greedy, but acceptors are surprisingly petty too. They rather choose nothing, over something! In fact, there is a 50% chance of rejection when acceptors are offered around $3 or less. The same result persists when stakes are much higher (e.g., when dividers allocate $70 for themselves, acceptors still reject $30).

So why do we consistently fall for this and prefer nothing over something?

The Psychology of Impulse

In explaining the irrationality, some have pointed to altruism: We punish bad behavior because we want to deter it from happening in the future. But of course, since the Ultimatum Game is a strictly one-off affair, the theory goes that we do it out of altruism, not to protect ourselves, but to make the divider think twice about being unfair in the future.

It’s a nice gesture, but we can’t put the finger solely on our altruistic motives. While we can be kind, selfless people, we’re also emotional. And that’s where we point to something more commonplace in our decision making: impulse.

Think about it like this. When we get an unfair bid of say $2, we have two potential responses:

“Screw you, jerk!” (Reject bid)

“Screw you! ... But OK, $2 is better than $0. (But you’re still a jerk!)” (Accept bid)

Performance in The Ultimatum Game can be determined by how one deals with anger.

Source: Georgina Vigliecca/Unsplash

Anger is present in both responses. In the first response, the mere presence of anger decides the response, leaving both players with nothing. In the second, the player acknowledges their anger, musters up enough cognitive control to suppress the emotion, and ultimately makes a decision independent of it, going home with $2 instead of $0. Impulse leads us to punish ourselves, just to spite someone else.

Psychology Essential Reads

The Time Cure: Taking Our Leave

Is a Texas Bitcoin Miner Making People Sick?

Seeing how naturally we can let emotion get the best of us, it should come as no surprise that the ‘impulse buying’ is a booming industry. This isn’t just dialing an ex, or having pizza delivered. 84% of Americans admit to having made at least one large impulse buy in recent memory. With an average American consumer spending $5,400 a year on impulse buys, the industry has created an epidemic.

The Psychological Mechanisms of The Ultimatum Game

Instead of altruism, the evidence suggests that responses in the Ultimatum Game come down to the role of impulse:

Neural evidence. Neuroimaging tools such as fMRI allow us to witness the internal battle directly. As expected, unfair offers activated areas in the brain associated with emotion (limbic structures) and control (pre-frontal cortices). And further, the relative activation of these two areas predicts the players’ ultimate decision. The neural evidence suggests that the decision-making battle is won and lost between these two competing forces.

Time to cool off. In the accepted bid, there’s a gap between “Screw you!” and “But OK, I’ll accept.” This is not an accident. It literally takes seconds and minimal cognitive effort to make this transition. This was proven when the Ultimatum Game is played out in the lab.

When the player is given time to take a breather between the bid and the time they have to make a decision, they are more likely to accept it even when it's grossly unfair. Giving ourselves the proverbial chill pill isn’t just good for de-stressing, it also helps us become better decision-makers.

Alcohol is kryptonite to our self-control.

Source: Yutacar/Unsplash

Drinking increases impulsivity. The best sources of evidence come from experiments where self-control is directly manipulated and sometimes, happily so. And what is the best, most reliable way to inhibit someone’s self-control? That’s right, booze. Drinking before playing the ultimatum game lead to a sharp increase in the rejection of non-zero unfair bids.

The drunker we become, the more impulsive we become, and the easier it is for us to succumb to the initial (in this case, anger-fueled) emotions. Anyone who has ever witnessed a bar fight that emerges out of nothing can tell you that alcohol is kryptonite to control our emotions. Even Kanye himself said he was drinking heavily that night at the VMAs.

The Impact of Impulse Control on Decision Making

Impulse control is complex. At a fundamental level, it’s our internal scale balancing emotion and deliberation. In the long-term, we may be happier going with the deliberate, well-thought-out option suppressing the emotional response.

The Ultimatum Game gives us insight into some of the factors that tilt the scale in the direction of impulse. Once we begin to understand these, we can begin to apply the counterweights.

Impulses are a major driver of spending behavior.

Source: freestocks/Unsplash

Trying to control an impulse? Make sure you’re fully armed with all the cognitive power you have. In addition to avoiding booze (sparing your ex of another late night apologetic call), avoiding shopping on an empty stomach is also key. As discussed in the consumer behavior book Blindsight, when we’re running low on calories, we’re much more prone to impulsive shopping.

Likewise, time is the great equalizer. Have an impulse to go shopping right after an emotional day at work? Just like it does in the Ultimatum Game, taking a bit of time off will likely restrain that feeling.

Along these lines, it’s important to have a set plan you can quickly fall back to for when impulses naturally arise. For every purchase, say over $20, that crosses your mind, make it a point to give yourself a day or two to contemplate deliberately. If it still looks like a good purchase after a day of deliberation, it’s much more likely to be worth it. Slow and steady is how you win the impulse race.

A decade later, Kanye's psychological profile hasn’t exactly made himself into the poster child for impulse control. But he has shown glimmers. As he told The Breakfast Club, “You just need to understand how to not get angry. It’s like in a boxing match: if you get angry, you lose.” He may as well have been describing the Ultimatum Game.

This post also appeared on the consumerism blog MJISME