Gender differences in the ultimatum game

SARA J. SOLNICK [*] I explore the behavior of men and women in the ultimatum game. In one treatment, players remain mutually anonymous. In the second treatment, players' gender is common knowledge. Average offers made do not differ based on the gender of player 1. Offers are affected by the gender of player 2, with men attracting higher offers, particularly from female players 1. Players 2 of both genders choose a higher minimum acceptable offer when facing a female player 1. These patterns led to substantial differences in earnings. Such striking differences in expectations and decisions could impact salary negotiations and other real-world transactions. (JEL C78, C92, J16) 1. INTRODUCTION The gender gap in wages has been a persistent feature of the labor market (Goldin, 1990). Women consistently earn less than men, even after controlling for a variety of human capital factors. Socialization before encountering the labor market may affect the divergent labor market outcomes of women and men (Corcoran and Courant, 1987). One contributing factor to women's lower wages that has not been explored may be different expectations and outcomes in bargaining. For many jobs, the market does not completely specify the wage. There is a "zone of indeterminacy," allowing the wage setter room to negotiate (Rees, 1993). In general, women may end up with a smaller share of the portion of wages that is up for grabs. Gerhart and Rynes (1991) found that male and female MBA students were equally likely to negotiate about their starting salaries. On average, men obtained increases of 4.3% over the initial offer, while women raised their salaries by only 2.7%. The differential negotiation outcomes accounted for 16% o f the male advantage in starting salary. Different abilities and expectations in bargaining can also affect the prices men and women pay as consumers when haggling is possible. In an experiment on discrimination in consumer-goods markets, testers were trained to bargain for new cars (Ayres, 1991, 1995; Ayres and Siegelman, 1995). Males received significantly lower initial offers and final prices after negotiating in a prescribed manner. Ayres attributed these results partly to factors specific to the car market, such as a lack of awareness by some groups that haggling over the price of a new car is expected. An alternative possibility is a widespread attitude among both women and men, perhaps based on decades of women's worse labor market experience, that women will be satisfied with less. Such an attitude could affect the wages offered to women whenever salary negotiation takes place. I search for differences in bargaining by men and women that may affect wages and other economic outcomes by exploring behavior in a stylized setting: the ultimatum game. The ultimatum game has been the basis for many experimental investigations (reviewed in Thaler [1988] and Roth [1995]). In the simplest form of the ultimatum game, one player proposes an allocation of a fixed sum of money. The second player may either accept the proposal, in which case the funds are divided accordingly, or reject it, in which case both receive nothing. [1] Outcomes rarely match what is expected from standard economic theory for the one-shot game, which indicates a token offer being made and accepted. The experiment reported in this paper involves two treatments of the ultimatum game. In each case I recorded the gender of the players. In the first treatment, players remain mutually anonymous. In the second treatment, the gender of the players is common knowledge. I examine how behavior is affected by the gender of the players under these conditions. I find that men and women both make lower offers to women and both men and women chose higher minimum acceptable offers when player 1 is a woman. Players 1 seem to believe that women will accept a smaller amount than men will. As a consequence of these patterns, men in the experiment earn more than women, with men paired with women gaining the most. …