The Effects of Cooperative and Competitive Physical Environments and Communication on Negotiation Outcomes in Ultimatum and Communication Games (final Order of Authors yet to Be Determined)

This study investigated the effects on bargaining outcomes of (1) cooperative versus competitive spatial configurations and (2) the opportunity to engage in communication . Sixty-one pairs of subjects participated in two game-theoretic bargaining games, the Ultimatum Game and the Communication Game, while placed in one of two settings: sitting across the length of a large rectangular table, or sitting at an angle at a t-shaped table. The findings revealed that . Implications and directions for future research are also discussed. Physical Environment, Communication, and Negotiation, 10/08/99 3 The Effects of Cooperative and Competitive Physical Environments and Communication on Negotiation Outcomes in Ultimatum and Communication Games Economists typically define individual decision makers as rational and selfish. Rational is defined as maximizing what people expect to receive, and selfish means that individuals consider their own benefits over the benefits of others. Game theory depends on this description of human behavior (Tompkinson & Bethwaite, 1995). In the ultimatum game, one player, called the allocator, proposes to divide a sum of money between him or herself and a second player, called the receiver. If the receiver accepts the proposed portion, both players receive the amounts designated. If the receiver rejects the proposed portion, neither player receives anything. Thaler (1988), Weg and Smith (1993), and Tompkinson and Bethwaite (1995) interpreted the theory as predicting that the allocator should propose an unequal split of the total. Specifically, the allocator should offer the smaller portion to the receiver, and the receiver should accept this small portion, since something is better than nothing. However, numerous studies have found that both allocators and receivers take actions that are inconsistent with this theory (Carter & McAloon, 1996; Hoffman, McCabe, & Smith, 1996; Thaler, 1988; Tompkinson & Bethwaite, 1995; Weg & Smith, 1993). It appears that most people resist the opportunity to unfairly allocate funds to their personal benefit and tend to split the funds equally (Thaler, 1988). Physical Environment, Communication, and Negotiation, 10/08/99 4 In most studies of the ultimatum game, the game has been played with stakes of $10, which is divided among the players. A review by Hoffman, McCabe, and Smith (1996) indicated that rational ultimatum behavior may be more likely when monetary rewards are increased. They argued that the $10 sum of money may not be significant enough to elicit true bargaining behavior. Hoffman et al. raised the stakes to $100, and found that allocators still offered nearly half the stakes. Tompkinson and Bethwaite (1995) posed a hypothetical scenario with a stake of $10,000, but still found an overwhelming concern for fairness and an equal division of the stake. Raising the stakes does not seem to alter the equilibrium behavior that deviates from rational game theory predictions. Some researchers have raised questions about the motivations that explain this apparently irrational behavior and attempted to induce people to make less equal offers in ultimatum games. In a modified ultimatum game where identities were concealed, Carter and McAloon (1996) still found that mean offers were neither extreme nor lower than basic ultimatum game outcomes. They concluded that subjects do not discard social rules of reciprocity or general rules of what constitutes a reasonable offer (Carter & McAloon, 1996). Weg and Smith (1993) were able to elicit more meager offers in dictator games (where the receiver cannot reject the allocator’s offer), but even these offers were not extreme. Hoffman, et al. (1996) report that economics and business students make smaller offers than students in psychology and other disciplines, which may reflect their economics training, but even these offers tend to be relatively equal and therefore deviate from game theory prediction. Physical Environment, Communication, and Negotiation, 10/08/99 5 The near equal distribution of the stakes is often attributed to the apparent concern for relative outcome and fair behavior (Tompkinson & Bethwaite, 1995). Pillutla and Murnighan (1995) offered an alternative explanation. They investigated the apparent fairness hypothesis and found that offerers were strategic and exploitive. Offerers made offers that appeared fair only when receivers had full information about the amounts to be divided or when third parties labeled offers as to their fairness (Pillutla & Murnighan, 1995). In a review of other experiments testing whether fairness norms could explain the unpredicted behaviors observed in ultimatum game research, they argued that fairness concerns alone were too simple an explanation. Instead, Murnighan and Pillutla proposed that avoidance of rejection, asymmetric definitions (opportunity for monetary gain versus moral attributes), and self-interest played important roles in explaining the failure of game theory in ultimatum games. Thaler (1988) concluded that “game theory is unsatisfactory as a positive model of behavior,( p. )” and further, that it does not appear to be of use as a prescriptive tool. Thaler came to these conclusions because subjects did not use money as their sole –decision criterion in the utility functions, and they were resistant to allocations that were defined as “unfair. ” Game theory provided a valid description in only one of eight experimental cells. Thaler cites Ochs and Roth’s study that replicated recipients’ willingness to decline positive but unfair offers (Thaler, 1988). Yet another explanation for the failure of economic theory to explain the behavior in ultimatum games may be found in Cialdini’s work on social proof, which is the tendency to change behavior and attitude to correspond with the behaviors and attitudes of similar others (Cialdini, 1993). Fiske (1992) argued that people organize their social Physical Environment, Communication, and Negotiation, 10/08/99 6 life in terms of their relations with others. This perspective means that people “want to relate to each other, feel committed to basic types of relationships, regard themselves as obligated to abide by them, and impose them on other people” (Fiske, 1992). To maintain relationships is an imperative; thus, not taking advantage of another player fits into the scheme of being a normal person . The Ultimatum Game and Physical Setting Most of the research on the social effects of the physical environment have examined the longer term effects of individuals in ongoing relationships, whether employees in offices or factories, students in dormitories, or residents of long-term care facilities (Altman, 1993). Empirical studies on the role of physical surroundings on short-term users of the facility—for example, customers— are far less prevalent. Physical environments make statements about a firm’s quality, communicate a particular image and purpose, and influence the customer’s satisfaction with the service provided (Bitner, 1992). Physical space should provide for individuals’ physical needs and aid activity patterns. The issues that most directly concern collaborative groups are cohesion, the strength of the ties holding the group together, and face-to-face interaction. Three environmental factors have been shown to affect cohesion and interaction: proximity, enclosure, and spatial orientation. Proximity has been positively correlated with the development of mutual friendships (Festinger, Schachter, & Back, 19__), and is closely tied to exposure (Sundstrom, 1989), which is a “sufficient predictor of communication” (Zahn 1991). Physical Environment, Communication, and Negotiation, 10/08/99 7 Manipulating any one environmental item can affect performance. Elton Mayo’s famous 1930s Hawthone study of the effects of lighting on workers’ productivity is the classic example of one manipulated environmental variable affecting performance. A more recent study has shown that subjects in pleasant scent conditions expected more favorable outcomes from negotiations and made more concessions (Baron, 1990). Given what we know from this research, one can expect that furniture may also have an effect on workplace behavior. Various nonverbal aspects of communication, such as distance between interactants and body posture, play a part in interaction (McGrath, 1984). Few studies on physical settings and dyads have been conducted , but some interesting observations have been reported. McGrath (1984) reported on interaction patterns and angle of orientation: when working on cooperative tasks, interactants tended to sit at right angles to one another. When they were working on a competitive task, they tended to sit facing each other. Hall (19 ) established a relationship between interaction and interpersonal distance zones, with most casual personal interaction taking place within a distance of eighteen inches and five feet (McGrath, 1984). Based on this literature, Bloomquist and Gasser concluded that space and body orientation dimensions of the actual physical relationship between pairs of people would prescribe their roles. They designed a study to observe the dyadic behavior based on distance and orientation. However, the small number of study participants did not provide an adequate enough database to statistically analyze the results. Physical Environment, Communication, and Negotiation, 10/08/99 8 The present study, which was designed to examine the role of cooperative and competitive physical setting and communication in collaborative behavior, was intended to replicate and extend the original study by Bloomquist and Gasser (1996). The hypotheses they tested were: H1: The cooperative physical setting would lead to higher money offers than the competitive physical setting. H2: The cooperative physical setting would lead to higher acceptance of offers than the competitive physical setting. The Ultimatum Game and Communication Game the