Studying the impact of introduction of cash into ultimatum games due to endowment effect

Abstract

The paper aims to study how the introduction of cash impacts an ultimatum game. Specifically, it was aimed to study the changes in their behavior due to the endowment effect by conducting the ultimatum game with real cash and comparing the results with an ultimatum game that is carried out without actual cash in hand. After conducting the games, we tested for two hypotheses: first, holding cash in hand might result in proposers offering lesser than normal expected amounts due to the endowment effect in action, and second, people when offered cash might choose to accept even lower offers due to the endowment effect. Both of these tests failed to give us significant results thus nullifying the impact of cash on an ultimatum game. The experiment however, left us with a possible bias of an aspirational effect to ponder on which we explore in the paper.