Behavioral Economics Lesson Five: Other Things Matter
Students will be able to:
- Describe factors impacting the decision-making process.
- Compare and contrast different thought processes in the decision-making process.
In this economics lesson, students will compare and contrast factors affecting decision-making.
Hold up on candy bar or other desirable item in class. Ask students how many would like to have it. Ask students what criteria they would use to determine who should get the item. After they have brainstormed several methods of making a selection, make a decision about what to do with the item. Ask students if they think your decision was fair. Remind them that others were interested in receiving it but may have been excluded based on the criteria they chose. Tell them this lesson will focus on the decision-making process and what factors people consider when making a decision. Explain that the outcomes of decisions may not always seem fair because people will view things differently. (Note: Teachers may want to review the Ultimatum Game Teacher’s Guide before completing the activities in this lesson.)
Show students Slide 2 of the Behavioral Economics: Other Things Matter PowerPoint. Have students read the quote and then ask the following questions: Is that statement fair? (Answers will vary; encourage students to explain why they believe it to be fair or unfair.) If you think it is not fair, what would be a fair percentage? Or, is any percentage fair? (Answers will vary, and students may point out that it is up to the individual who earned the money to decide what they should do with it.) Have students define the concept of fairness means. (Many answers are possible, but students might mention considering the needs and interests of other parties or stakeholders and maintaining a balance between them. Others may argue that making sure everyone has an equal chance to share in things is important in fairness.) Ask students if people who act in their own self-interest are being greedy? (While a variety of answers are possible, most students will probably suggest that anyone who keeps an “excess” of anything without intentions to share would be considered greedy.)
Tell the students that they will be participating in a game and they have the potential opportunity to win something by participating. (Note: Have a simple reward available for students, such as extra credit points, candy, stickers, or play money. You may or may not tell them what the reward is before playing the game.) Divide the class into two equal-sized groups. If you have an uneven number of students, have one student assist by distributing and collecting the forms in the game. Explain that half of the class will be playing the role of proposers and the other half will be responders. Review the instructions in Slides 3-6. Give each proposer a number, telling them to keep their number out of view at all times. Distribute copies of Proposer’s Offer Sheet to each proposer. Distribute copies of Responder’s Summary Sheet to each responder. Review the instructions for the game in Slides 3-6, explaining the roles of both the proposers and the responders. Remind proposers to write down their assigned number on the top right-hand corner of their offer sheet and fill in their offers before starting the game. Answer any student questions before beginning the game, referring to the Ultimatum Game Instructions to guide the activity. Tell students they will play two rounds of the game. After completing Round 2, use questions in Slide 7 to review the game. (Proposers: Did anyone have a first-round offer rejected? What changes, if any, did you make in the second round? In most cases, proposers will say they offered less than half in the first round and then offered more, usually at least half, in the second round. Proposers: Did you feel compelled to offer more in the second round? Why or why not? In general, responders wanted more fairness and proposers did not want to end up with zero in the game; they had an incentive to offer more. Responders: Did anyone reject an offer in the first round? Why? Most will say that an offer below 5 seemed unfair, and they would rather both themselves and the proposer get zero than be treated unfairly. Responders: Did anyone accept less than half of the total in the first round? Why? Most will say they are aware that they started off with nothing, so any offer above 0 makes them better off than before. What should proposers offer if they want to maximize their own benefits? Guide the students to the possibility of a split of 9 for the proposer and 1 for the responder. Because rejecting such an offer results in zero rewards, responders should accept such an offer because they gain something which is better than what they started with, namely nothing. What are responders giving up if they reject an offer of only 1 out of the 10 rewards? They give up one reward. What would they gain? Nothing material would be gained because they thought the offer was unfair. However, they may feel a sense of satisfaction knowing the proposer ends up with nothing, which is punishment for making a low offer.) Use Slides 8-10 to debrief the activity. Ask the students to explain how an Econ would behave as a responder in the ultimatum game versus how a Human would behave in choosing whether to accept or reject the offer. (Econs would note that everyone started off with nothing so responders should accept any offer above zero because that gives them more than they started with. Humans, on the other hand, may also weigh whether or not the offer is fair in deciding whether or not to accept it. They may reject any offer that doesn’t give them a “fair” share even if doing so means that they end up with less than if they had accepted the unfair offer. Humans may sometimes take action to spite others, even if doing so imposes a personal cost.)
Distribute a copy of Case Study: Other Things Matter to each student. Tell students to read the document and answer the two questions at the end. After students have completed the assignment, use Slides 11-12 to explain the results of the study and discuss the role of incentives and other influences on people’s behavior.
Have students describe one decision they recently made, listing several incentives or variables that affected their decision-making process. Then, have them briefly explain the difference between how an Econ might make that choice versus how they made that choice and if they would change their decision after this lesson.
Tell the students that humans are not the only species who work for different incentives and who have a sense of fairness. Explain that they will be watching a video clip entitled Capuchin Monkeys Reject Unequal Pay. After showing the video, ask students the following questions: Did the in this clip work for different types of incentives? (Yes, the monkeys did a task for cucumbers and grapes.) Did the monkeys exhibit a sense of fairness in their behavior? (Yes, the monkey who performed the same task as another monkey but received the lesser reward – the cucumber instead of the grape – became upset.) How did this video clip demonstrate the same ideas as the Ultimatum Game or the Bionicle experiment? (The Ultimatum Game emphasized fairness and how humans want others to be fair. The Bionicle experiment shows how people work for different reasons and that a sense of meaning and recognition might be two reasons, although the monkey demonstrated that even in work, people might want to be fairly rewarded as well.) Have students write a short paragraph summarizing what they conclude from this lesson.