But behavioral economics reveals one final danger of the bounds of self-interest:  people are willing “irrationally” to sacrifice their own self-interest and welfare not only to help others who act fairly, but also to punish others who they believe are not acting fairly.   In a simple but telling experiment called the “Ultimatum Game,” two players who neither know nor see each other are instructed to split a sum of money.  The first player must make an offer, and the second has only two options:  accept the offer, in which case both players take home their share of the money, or reject the offer, in which case both players take nothing.  The consistent outcome of this game is both surprising and contrary to traditional economic “self-maximizing” predictions:  almost all subjects divide the money so as to give the first player no more than 60% and the second no less than 40%. 

More surprising yet, the vast majority of second players reject the offer—and give up a free benefit for themselves—if the first player offers less than 30%.  This tendency of the second players to sacrifice their own selfish interest in obtaining a cost-free benefit simply to “punish” the first players’ greed or stinginess—essentially, their “unfairness”—suggests something important about the operation of a payment-plan system.  On the one hand, debtors are likely to accept a plan process that requires a fairly equal distribution of benefits and burdens, gains and costs among debtors and creditors.  On the other hand, though, debtors—and those on the verge of becoming debtors—are likely to sacrifice their own self-interest in achieving a benefit if they view creditors or system administrators as “overreaching” or acting unfairly in the plan process. 

Unlike the cognitive biases discussed earlier, the results of the Ultimatum Game might well differ for European players—at least for players from some European cultures.  The results in U.S. experiments may reveal not a universal rejection of imbalance, but rather an aggressively “individual rights-oriented” mentality unique to residents of the United States.  My sense is that this is not so.  I believe, and recent scholarship suggests,  that the Ultimatum Game would play out very similarly with subjects from most parts of Europe, at the very least northern Europe.

To the extent that the implications of the Ultimatum Game do apply to consumer behavior in Europe, some of the European approaches seem more likely than others to achieve positive results in light of debtors’ “bounded self-interest.”  Whatever the economic or social reasons supporting a particular consumer debt relief provision, behavioral economics offers a revealing perspective to consider in evaluating the effectiveness of a given approach.  The level of required sacrifice for the promised benefit, the length of waiting time for that benefit, and the consistency of sacrifices and rewards among debtors in different districts all impact the “fairness,” and consequently the debtor-educational potential, of a debt relief system.

A.  The Danger of Mismatching Benefits and Burdens:  “Unfair” Sacrifices

European legislators have agonized over how best to chart the line between the Scylla of “de-responsible-izing”  debtors with “easy” relief and the Charybdis of demanding too much sacrifice and thereby dooming payment plans to failure.  The Ultimatum Game suggests one more potential danger of plans that debtors perceive as mismatching benefits and burdens:  Payment-plan laws that make demands that debtors might view as overreaching and “unfair” might well lead debtors to sacrifice their self-interest in obtaining debt relief.  Instead of accepting the message of payment morality and engaging the system, debtors and non-debtors alike might seek to “punish” creditors whom they view as unduly advantaged at the expense of consumers in the system.  Such laws may well leave debtors and non-debtors with a sour taste for credit and a vengeful attitude toward creditors, undermining the positive educational potential of the payment-plan approach.