Wednesday, September 02, 2009

The Ultimatum Game

Several years ago scientists conducted a study, using the ultimatum game, in which human subjects were involved in negotiating, through computer messaging, with other people about various ways to divide up a certain sum of money. $20 dollars could be split up evenly, or an offer could be made to split it into two sums of $19 or $1. The subjects could accept or decline offers made by the other person involved in the "game". They had no way to discuss or negotiate terms with the other player. The subjects would receive any actual money they accepted in the game when it was over. Neither player would receive any money if an offer was declined.

The catch was that the human subjects were playing with a computer. There were pre-determined offers the computer would make, none of which were altered by the choices the subjects made.

Inevitably, the computer would make an offer that would seem unbalanced and unfair to the person playing the game. It might offer to give the subject $2 and keep $18 for itself. Most people would react with irritation and refuse offers so extremely biased in favor of the other player. Despite the knowledge that any money they accepted would be theirs, subjects would repeatedly decline to accept such low offers.

Ultimately, the subjects who refused unfair offers would end the study having earned less money than subjects who simply accepted any offer which came their way.

The lesson drawn from this experiment? Sometimes humans act in ways that do not directly benefit them.

There are valid reasons to act in such ways. If you believe you're dealing with a person who is taking advantage of you, teaching them that you won't be pushed around and that their actions will ultimately harm themselves can be worth taking a certain amount of harm upon yourself. You're hoping to sacrifice short-term benefits for long-term respect.

The tricky part is in discerning the tipping point which carries us from wise refusals to outright stubbornness which is detrimental to ourselves.

This experiment has been on my mind frequently as I have been dealing with my father's house, its extensive repairs, and the contractor I have been working with. All in all, things have gone smoothly and I am happy with the repairs. However, there have been a few hiccups along the way. Being presented with charges which were a little more than what I had agreed to, I found myself calculating the risk benefit of making a big deal about it. In one instance, the amount seemed reasonable and I knew that the repairs had been more extensive in one area than we had anticipated. In another instance, although the amount was not large--about$200--it seemed superfluous. The contractor wanted to be paid for extra time for moving an electrical outlet a couple of feet. I thought that was stretching it because all of the walls already were exposed, making it a relatively easy task, and moving it out of the way so that they could do the repairs seemed like a normal part of the work for which I was already paying.

I discussed this with the contractor, confronting him in a reasonable way about whether I was paying him by the job, or hourly. He said "hourly". I pointed out that I doubted he was going to reimburse me if they happened to get things done earlier than they had anticipated, to which he had no reply.

Not wanting to injure the relationship, I told him I would pay for the extra time, but that from now on I would want a detailed breakdown on any future projects of time and materials in order for me to have a better handle on what he was expecting. He got his money, but I felt as if I had sent a message that I was paying attention and he couldn't expect me to simply hand over money in the future without being questioned about it.

This week he came to me with an offer to do the bathrooms which was about $1500 higher than what we had previously discussed. I told him I would need to think about. I called him back a couple of days later and asked if he was willing to come down on his price, closer to what we had talked about on numerous occasions. He told me he wasn't willing to change his pricing.

If this had been the first disagreement, I would have accepted his offer. If he had come down even a little as a sign of good faith, I would have accepted his offer. Instead I felt as if we were involved in a game of "chicken". Who was going to blink first in this battle of wills?

Not me.

I thanked him for all the work he had done so far, paid him what I owed him, and said that we simply couldn't afford the extra $1500 he had tacked onto his pricing. We would do some of the work ourselves.

Never mind the fact that we have never tiled anything in our lives! We do know how to install a toilet, though..and replacing the vanity doesn't seem too hard.

Now I am wondering if I have taken too much harm onto myself in order to establish the principle that I will not be pushed around.

Time will tell.


DH said...

No worries. Good thing you and I are such experts at working on large projects together. ;o)

Assistant Village Idiot said...

It is not just a game of chicken with you. It's called altruistic punishment, and seems to be quite necessary for society to thrive. You are doing the next person down the line a favor as well.

Jacks said...

Believe it or not, if you do not choose to do the job yourselves, you spend less money by parceling up the work to the specific suppliers.

Your GC is buying the material from some other supplier, and marking it up plus the labor mark-up.

I don't know about installing anything other than the tile or flooring involved, but up here in the midwest, the general rule of thumb is to just double the cost of the materials unless it is a small job.

So, if you price it out, you should be able to tell if you were quoted a good price.

Here are a couple good tile resources. In the interests of full disclosure, the 2nd site is my employer.

terri said...

Jacks..if I find a good tile selection and order it...I'll be sure to send an e-mail to your employer to let him/her know how dedicated you are to representing them! :-)

Thanks...I'll definitely check those out. I have to assemble all of the materials in the next couple of weeks.