Playing the Ultimatum Game

Suppose something important is to be divided between two teams, say, Mr Hazare and the Government. What's the best way of doing it?

Game theorists have analysed the problem in the Ultimatum Game, which is played only once. The first player proposes how to do the division, and the second player either okays it or says no.

If the answer is no, neither side gets anything. But if it is yes, the split is done as proposed by the first player.

What happens is this: Player one, say the Government, proposes something between the four different Lokpal Bills.

Mr Hazare can say no and end the game.

But he can also say yes, if the Government makes a proposal via the Standing Committee which meets all of his conditions.

Now, the Government knows that Mr Hazare will reject any higher demand. On the other hand, Mr Hazare would not want to reject because, then, he would get nothing.

Getting it just so

So, the task before Mr Abhishek Manu Singhvi is to get his offer just right. If that happens, we would have what is called Nash Equilibrium, where neither side would want to change its strategy, given the other side's strategy.

But, another Nash Equilibrium is possible where no one gets anything at all. This would happen if Mr Hazare rejected all proposals. Here also, neither could get more by unilaterally changing their strategies. This is a ‘BadNash'.

Another variant is called the “Reverse Ultimatum Game”. In it, the Government offers many options.

This game only ends either when the responder accepts an offer or abandons the game. It turns out that in either case, the Government would get less than Mr Hazare.

Therefore, it is likely that the Government will make an offer that Mr Hazare cannot accept.

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