How about a UK/nationwide version of this game.
Player 1 calls himself the government and goes and lives in a big
posh house not a million miles from Downing Street. Players 2 on
down go on the dole and live in a bedist somewhere between
Hackney and Barnsley. Player One's friend has 2 big jags; players
2 on have no car but live close to a derelict factory(used to pay well
but closed due to deindustrialisation), with lots of loose bricks, not
far from some large shop windows(goods unaffordable to Min Wage
earners). Players 2 on could make a valuable contribution to
society, or they could do precisely the opposite.
Player One can offer Minimum Wage work, with threat of
withdrawal of dole if not taken up, with no prospects of promotion,
using the equation (Dole+bedsit rental housing benefit=Full time
Min Wage-travel costs-tax). Or Player one can offer better jobs.
Which strategy should Player One opt for for 'mutual benefit'? What
will the response of players 2 etc be? Do we need neuroscientists
to work this one out?
Hillary Shaw, School of Geography, University of Leeds.

On 28 Feb 2003, at 9:13, D F J Wood wrote:

> How about this then - economists, in trying to work out why people don't
> fit their theories, have turned to neuroscience. The article is almost
> self-critiquing so I won't say anything more...
>
> David.
>
> New York Times. February 27, 2003
> http://www.nytimes.com/2003/02/27/business/27SCEN.html
>
>
> Looking Inside the Brains of the Stingy
> By VIRGINIA POSTREL
>
> Here's a game economists play: Player 1 has $10 and
> can give any dollar amount to Player 2. Player 2 can
> either accept or reject it. If Player 2 accepts, they both
> keep the money. If Player 2 rejects it, neither player
> gets anything.
>
> What should the players do? Arguably, Player 2 should
> accept whatever is offered, since some money is better
> than none. Player 1 should thus offer as little as
> possible: $1. That strategy is the standard game-theory
> equilibrium.
>
> But that's not necessarily what happens when real
> people play this "ultimatum game" in laboratory settings
> with real money on the line. Faced with low-ball offers,
> many Player 2's reject them. And many Player 1's
> make more generous offers, often nearly half the
> money.
>
> "About half the subjects that we observed played
> according to the way the game theory said people
> should play, and about half didn't," said Kevin
> McCabe, an economist and director of the Behavioral
> and Neuroeconomics Laboratory at George Mason
> University.
>
> The Player 1's who do not follow the presumably
> rational strategy often wind up better off. Even without
> communicating with fellow players, they are able to
> cooperate for mutual benefit.
>
> Why do people react differently to the same situation?
> And why do so many people give up money to punish
> anonymous cheapskates?
>
> Experimental economists have mapped out these
> anomalies and tested how much they affect economic
> interactions. Now a new field, called neuroeconomics,
> is using the tools of neuroscience to find the underlying
> biological mechanisms that lead people to act, or not
> act, according to economic theory.
>
> In neuroeconomics, volunteers go through exercises
> developed by experimental economists studying trust or
> risk. Instead of simply observing subjects' behavior,
> however, researchers use imaging technologies, like
> M.R.I.'s, to see which brain areas are active during the
> experiment.
>
> Researchers at Princeton, for instance, have found that
> receiving low-ball offers stimulates the part of the brain
> associated with disgust. "They can predict with good
> reliability, from looking at the brain, what a person will
> do," said Colin F. Camerer, an economist at the
> California Institute of Technology. "People whose
> brains are showing lots of disgust will reject offers."
>
> Professor Camerer says looking inside the brain's
> "black box" is like looking inside a company.
> Traditionally, economists treated a company as a
> largely automatic "production function" that turns labor,
> capital and resources into output. Over the last several
> decades, however, many economists have turned their
> attention to understanding companies' internal
> workings. Most prominently, "agency theory" examines
> how companies can be governed to encourage
> employees (the "agents") to pursue the goals of the
> owners, rather than their personal agendas.
>
> This research hasn't replaced the production-function
> approach, but it has enriched economists'
> understanding of company behavior. Neuroeconomists
> want to do something similar for how individuals make
> economic choices.
>
> "Neuroeconomics could be to consumer theory what
> agency theory is to the production-function approach,"
> Professor Camerer said.
>
> While many economists remain skeptical,
> neuroscientists have welcomed the interest.
>
> "Anyone working with the brain likes this approach
> because economists have these nicely defined
> behavioral models," said Paul Zak, an economist and
> director of the Center for Neuroeconomics Studies at
> Claremont Graduate University.
>
> Neuroscientists do experiments like looking at which
> parts of the brain are active when someone looks at
> photographs and decides which faces are trustworthy.
> Neuroeconomists don't just ask people to use their
> imaginations, though - they have subjects play
> laboratory games to find out what happens in real
> interactions.
>
> Professor Zak and his colleagues study trust with a
> variation of the ultimatum game. Each player receives
> $10. Player 1 gets an additional $10. Players interact
> anonymously over computers. Player 1 can send any
> whole-dollar amount to Player 2. Whatever he sends is
> tripled, so a $5 gift turns into $15. Finally, Player 2 can
> return some of the money to Player 1.
>
> If Player 1 expects Player 2 not to send any money in
> return, Player 1 will keep the initial stake. That's the
> game's standard equilibrium.
>
> "In fact," Professor Zak said, "most people send about
> half of their stake to Player 2. They're signaling that
> they want to trust them." In response, about 75 percent
> of the Player 2's return some money, making both
> better off.
>
> "Even though we can't see each other and we don't
> know each other, we understand the other person as a
> human being," Professor Zak said. Extrapolating from
> animal results, he hypothesized that the hormone
> oxytocin, which is associated with social bonding, might
> play a role.
>
> "When you read the studies on lower mammals," he
> said, "everything suggests that this is a candidate to
> induce trustworthiness because it's something that you
> would not consciously be aware of and yet it would
> influence decision making."
>
> Researchers tested each subject's blood for eight
> different hormones right after the person made the
> decision about whether to send money. For Player 1,
> no hormone appeared to make a difference. But the
> more money the Player 2's received, the higher their
> oxytocin, even after controlling for factors like age, sex
> and menstrual cycle timing. The higher the oxytocin, the
> more money each Player 2 returned.
>
> That response didn't correlate with various personality
> measures. "It's not that these people who returned
> more money are just nicer," Professor Zak said.
>
> Neuroeconomists caution that their research is just
> starting. But that does not reduce their enthusiasm.
>
> "For me, it's just an extremely exciting area in terms of
> potential," Professor McCabe said. "There's always
> new findings every day."
>


Hillary Shaw, School of Geography, University of Leeds,
LS2 9JT