Growing up, I was a big fan of The Price is Right. In fact, I credit the show with helping to spark my interest in judgment and decision-making. One of the most interesting aspects of the show (from a psychological perspective) is the “One Bid” game played the four contestants on Contestants’ Row. (For those feeling ambitious, Deadspin writer Ben Robinson offers some excellent advice on how to make it onto Contestants’ Row.) The game is intriguing because winning can require tactics that feel unfair, motivating many contestants to bid suboptimally and leave money on the table.
In the One Bid game, the four contestants sequentially bid on a prize whose actual retail price is not familiar to most people (for example, an elliptical or a drum kit). The contestant whose bid is closest to the prize’s actual retail price (without exceeding it) wins the prize for free and then gets to play a new game on stage for an even bigger prize. For contestants who bid last and have some sense of the actual retail price, the rational, self-interested strategy is relatively clear. If you think all the other bidders have over-bid (and thus cannot win), bidding $1 (the smallest possible bid) guarantees a win. If you think all other bidders have bid less than the actual retail price, bidding $1 more than the highest bidder guarantees a win. However, this latter “cut-off” strategy is easier said than done, because it virtually guarantees that the contestant you’re cutting off cannot win (they can only win in the unlikely event that they bid the exact retail price). The cut-off strategy is perfectly legal and often rational, but it can feel mean. (Here, a former Price is Right contestant who utilized the cut-off strategy considers its moral implications.) Thus, the One Bid game is a context that can pit interpersonal considerations against rational self-interest.
What kinds of situational factors influence the willingness to implement the cut-off strategy? An interesting working paper by Pavel Atanasov (University of Pennsylvania) and Jason Dana (Yale) suggests that the gender of competing bidders can influence one’s willingness to cut-off opponents. In an analysis of nearly 6,000 rounds of the One Bid game, Atanasov and Dana found that the last bidders in a round were significantly less likely to cut off same-gender opponents than opposite-gender opponents. Follow-up analyses suggested that this pattern of discrimination was “taste-based,” rather than “statistical,” meaning that the differential use of the cut-off strategy based on opponents’ gender was not driven by rational considerations about the effectiveness of the cut-off strategy. Atanasov and Dana estimated that final bidders lost about $147 in expected earnings by not treating same-gender opponents the same way they treated opposite-gender opponents. The analyses suggest that even when the incentives for rational (gender-unbiased) play are high, same-gender favoritism can lead players to avoid a subjectively mean but economically rational strategy.
Another factor that may influence the willingness to cut-off is physical closeness to opponents. The four bidders stand next to one another, facing the stage (with Contestant 1 on the far left and Contestant 4 on the far right), and bidding is done left-to-right. Initial positions are seemingly randomly assigned (at the very least, it seems that contestants themselves can do little to influence their position). After each round, a new contestant is selected from the audience, replaces the last winner on Contestants’ Row, and bids first in the next round. Thus, sometimes the final bidder will be standing right next to the third bidder (for example, when Contestant 3 is the third bidder, and Contestant 4 is the final bidder), and sometimes the final bidder will be standing far away from the third bidder (for example, when Contestant 4 is the third bidder, and Contestant 1 is the final bidder). Let’s imagine that the third bidder has provided the highest of the first three bids. My hypothesis is that final bidders will be more willing to cut-off the third bidder when their opponent is standing on the other side of Contestants’ Row than when their opponent is standing right next to them. Testing such a hypothesis could provide novel evidence on the effects of physical proximity on social preferences.