The findings of research in experimental behavioural economics over the past two decades have been impressively convincing. Until recently, economists assumed that individual behaviour is controlled by rationality. The consumer was perceived as a rational person who strives to maximize his utility. This is the concept of homo economicus, a prototype of an economic person and starting point for model formulation. However, this theory often overlooks the fact that homo economicus is not a person of flesh and blood, but a conceptual notion.
Experimental evidence shows that the behaviour forecast by the standard model often does not correspond to reality. Factors like fairness, trust and moral values also play a role in the decision-making of the real economic actor. The knowledge gleaned from the observation of different negotiation plays provides the possibility for the derivation and representation of individual behaviour patterns. But the studies’ findings reveal that feelings of fairness, generosity and trust play a crucial role for the results. The object of this work is to find an answer to the question if homo economicus is still alive or not. Therefore I will consider different experiments of the dictator game from the literature. Experimental games offer good possibilities for the representation and derivation of individual behaviour patterns.
Chapter 2 presents the concept of homo economicus and describes his properties. Chapter 3 deals with experimental games, with the major focus being on the dictator game. Individual studies will be presented. The last chapter concludes.
Table of Contents
1. Introduction
2. The concept of Homo Economicus
2.1 Properties of Homo Economicus
2.2 Criticism
3. Experimental Games
3.1 Dictator Game
3.2 Findings
3.3 Criticism of experimental economics
4. Conclusion
Research Objectives and Themes
This essay aims to critically evaluate the relevance of the homo economicus model in contemporary economic theory by juxtaposing its traditional assumptions against evidence from behavioral economics, specifically through experimental dictator games. The central research question explores whether the homo economicus remains a valid explanatory prototype in light of human behavioral patterns that deviate from pure rationality and self-interest.
- Theoretical foundations and core properties of the homo economicus model.
- Methodological critique of rational choice and utility maximization.
- Application of experimental games (Dictator Game) in behavioral economics.
- Analysis of social norms, fairness, and altruism as influencing factors.
- Limitations of laboratory settings in representing real-world economic decision-making.
Excerpt from the Book
3.1 Dictator Game
The dictator game is popular and extremely simple (Dufwenberg and Muren, 2006). The dictator game represents a simple form of a sequential game. There is a “dictator” (also called distributor) and a “recipient”. The dictator determines how the “cake” is distributed among the two players. The recipient has no right of veto; he is powerless and must accept the offer of the dictator (Eckel and Grossman, 1996).
Because of the impotence of the recipient, the dictator should have a dominant strategy according to which he gives the recipient nothing. However, the theoretical predictions are not observed in the experiments. The offers from the dictators are often greater than 0 (Ockenfels and Raub, 2010). Assuming a utility maximizing “dictator”, he would by definition retain the entire amount for himself if he was truly homo economicus, and the recipient would get nothing (Camerer, 2003). Initially supported as explanation on standard models of social preferences, which define themselves through as the integration of other persons involved in the transaction on the distribution of material resources. As plausible appear that the conduct of pure altruism is due (Andreoni and Miller 2002). Altruism means thought and action determined by unconditional regard for the welfare of others. Inequality aversion, however, is not associated with emotion. Here the actor draws the greatest benefit from the uniform distribution of a quantity, even though he might need to engage in activities that reduce his material pay-off at the end. The dictator game is rather known as a “one-person-decision game” (Bolton et al., 1998, p. 261).
Summary of Chapters
1. Introduction: The introduction outlines the traditional economic concept of homo economicus and defines the objective of the work to question its validity through the lens of behavioral experimental evidence.
2. The concept of Homo Economicus: This chapter defines the core properties of the homo economicus model, such as rationality, utility maximization, and perfect information, while acknowledging common criticisms regarding its realism.
3. Experimental Games: This chapter examines the methodology of dictator games, presents empirical findings that challenge standard rational choice predictions, and discusses the limitations of laboratory-based experimental economics.
4. Conclusion: The conclusion synthesizes the findings, suggesting that while homo economicus is an abstract, limited model, it retains utility for aggregate economic analysis despite its failure to explain individual deviation driven by social factors like fairness.
Keywords
Homo Economicus, Rationality, Utility Maximization, Behavioral Economics, Dictator Game, Altruism, Fairness, Nash Equilibrium, Experimental Economics, Social Norms, Decision-making, Methodological Individualism, Economic Theory, Reciprocity.
Frequently Asked Questions
What is the primary focus of this essay?
The essay investigates the ongoing validity of the homo economicus model by comparing its traditional assumptions with findings from experimental behavioral science.
Which economic model is discussed in the work?
The work focuses on homo economicus, defined as a rational, utility-maximizing economic actor with complete information and consistent preferences.
What is the central research question?
The research seeks to determine whether homo economicus is still alive or if it has been rendered obsolete by empirical evidence showing human deviation from rational strategies.
Which methodology is employed to test the model?
The author uses a literature-based review of experimental games, specifically focusing on the dictator game, to contrast model predictions with actual human behavior.
What key findings are discussed in the main part?
The main part highlights that individuals often act more fairly and altruistically than the homo economicus model predicts, emphasizing the role of social norms and perceived fairness.
Which keywords characterize this research?
Key terms include homo economicus, rationality, utility maximization, behavioral economics, dictator games, and social norms.
How do dictator games challenge the assumption of the "rational egoist"?
Dictator games show that players often share resources even when they have a dominant strategy to keep everything for themselves, contradicting the assumption of pure self-interest.
What is the "warm glow" effect mentioned in the context of the dictator game?
The "warm glow" refers to the psychological satisfaction or improved conscience people feel after performing a "good" deed, such as donating money.
Why is laboratory-based experimental economics sometimes criticized in the text?
The text notes that laboratory settings are "artificial environments" where participants may behave differently because they know they are being watched or judged by experimenters.
What is the final conclusion regarding the future of the homo economicus model?
The author concludes that while the model has significant explanatory limitations at the individual level, it remains a useful heuristic for analyzing aggregate economic behavior.
- Quote paper
- Merve Gülacan (Author), 2015, The concept of "Homo Economicus" and Experimental Games, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/320397
