A Behavioral Theory of Allocation in the Dictator Game

Abstract

This paper attempts to explain the behavior observed in the dictator game without explicitly assuming a utility function. Alternatively, I consider the representative behavior of a society composed of heterogeneous individuals in terms of altruism and self-interest. Based on these two principles, I present an allocation that aggregates the society's preferences. The result depends crucially on the value of the resource under dispute for the dictator. Even if the value of the resource is extremely important for the dictator, the dictator cannot justify a share of the resource larger than 3/4 of the total. An allocation proposing more than this share of the resource cannot reach social consensus. On the other extreme, if the value of the resource is sufficiently unimportant for the society, an equal split of the resource emerges in the limit. Keyword: Dictator Game; Allocation Rules; Altruism; Self-interest; Conflict Resolution. JEL classifi cation: C91, D03, D63, D74.