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47: Ultimatums

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Today, we’re talking about ultimatums.
Specifically…

Are ultimatums ever useful?

Show notes and links:
More than thirty years of ultimatum bargaining experiments: Motives, variations, and a survey of the recent literature (Working Paper)
Ultimatums and Economic Sanctions: The Case of Coercive Diplomacy in the 1956 Suez Canal Crisis


Full episode text

In economic experiments, there’s a long history of what’s called the ultimatum game. Where one player receives a sum of money and proposes how to divide that sum with someone else. The second player either accepts that proposal, at which point the split happens as proposed — or rejects the offer, at which point neither of them get anything.

Since this game was first played in 1982, thousands of experiments have been done based on that one, in just about every possible combination. Ultimatums can be found in a variety of places, from economic sanctions to political discussions to marriages and relationships.

An ultimatum, essentially, is a line drawn in the sand. And their usefulness depends on a number of factors that generally differ from their effectiveness. The key to an effective ultimatum is fairly simple — be willing to follow through with consequences. But even if it can “work,” do you think it’s ever actually effective?