Undergraduate Honors Theses

Thesis Defended

Spring 2011

Document Type

Thesis

Department

Economics

First Advisor

Dr. Nicholas Flores

Abstract

Economic theory assumes individuals are utility maximizing with stable preferences. Several studies using the Ultimatum Game document deviations from rational behavior; however, research does not currently explain the stability of these preferences. It may be that responders hold underlying preferences for fairness and punishment, or it may be that individuals construct their offer preferences in the moment, so that their choices are influenced by current emotional state. In this study, responders were put into different induced emotional states and their elicited and revealed preferences were measured. By comparing subjects’ preferences between induced emotional states and between order of elicitation within induced emotional states, this study disentangles these two competing hypotheses. Using both Fisher’s exact tests and OLS regressions on the data, it appears that responders’ preferences are predominantly stable. However, induced emotional state was found to influence subjects’ stated preferences for punishment and—when combined with preference prediction—the consistency of responders’ preferences for Ultimatum Game offers.

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