The Ultimate Game: How this behavioural experiment applies to the OSS buyer/seller chasm (part 10)

Last year, we published a series of articles about the chasm that exists between OSS/BSS buyers and sellers. “The chasm” is best exemplified by the situation where:

A buyer (eg network operator) desperately wants a new OSS to improve operational efficacy and every seller (eg a software vendor) desperately wants to sell their OSS to the buyer, yet it still tends to take 18-24 months* to formalise an OSS transformation contract.

As discussed the three main reasons for the typically lengthy “match-making dance” are:

• Trust
• Risk / Fear
• Confidence / Skill-set

Yet the approaches used during a typical OSS procurement event make the trust / risk / fear chasm between buyer and seller even wider.

Today we’ll look at this through the lens of The Ultimate Game and also discuss an interesting observation we’ve seen when dealing with open-source OSS vendors compared with proprietary vendors.

The “Ultimate Game” experiment is a well-known study in behavioural economics and psychology. It involves two participants and is designed to explore trust, fairness, decision-making, and social cues.

How the Ultimate Game works:

1. There are two parties involved:
   1. One participant is the proposer, and
   2. The other is the responder
2. In our case, the OSS Seller / Vendor is the proposer and the network operator / buyer is the responder.
3. The proposer is given a certain amount of money (eg $100 in $10 notes).
4. The proposer must decide how to share the money between themselves and the responder. This can range from giving the responder nothing to an equal split through to even giving the responder everything
5. The responder decides whether to accept or reject the offer.
   • If the responder accepts the proposed split, both participants receive the amount offered
   • If the responder rejects, neither participant receives anything

In theory, it’s “free money” for anyone who plays. If the proposer only offers $10 and keeps $90, then the responder still gets money for nothing. However, behavioural psychology shows that responders often don’t see it that way and would rather both parties get nothing instead of such an “unfair” share of the bounty.

Even though a rational economic model suggests the responder should accept any non-zero amount (since “something is better than nothing”), many responders reject offers they perceive as unfair. This experiment highlights how fairness, reciprocity, and social norms influence human behaviour, often even overriding self-interest. As a result, Proposers often anticipate rejection of unfair splits and tend to offer more equitable distributions (eg 50/50, 60/40).

Over the years we’ve seen a really similar “ultimate game” dance occur many times during OSS procurement events.

In many cases, an ultimate game is structurally enforced by the carrier. Their procurement teams are often incentivised to maximise the split in their company’s favour. The perceived “fairness” of a 50/50 split isn’t an option for procurement team members who want to receive their annual bonus. They can only accept a perceived 30/70 split or better and are willing to go through tough negotiations to achieve it. Unfortunately, this often leaves the seller / proposer feeling aggrieved (and quietly seeking mechanisms to bring more balance into the deal), but still accepting the “unfair” split because they desperately want to win the project. The buyer / seller partnership is effectively flawed from the outset.

As a comparison, let’s put on the hat of an entrepreneur, who might approach the Ultimatum Game differently than the average OSS buyer or seller due to their focus on long-term relationships and value creation. Here’s how your entrepreneurial mindset might shape the scenario and the split offered differently (but I’ll share a video afterwards that could flip this perspective further):

• Long-Term Thinking: Successful entrepreneurs often value building goodwill and partnerships. You may consider the responder’s acceptance as a key part of a broader strategy of fostering trust or cooperation
• Value Creation Over Cost Minimisation: Instead of focusing solely on maximising their immediate gain, as an entrepreneur you might ask: How can I make this decision reflect my values, enhance this partnership and my reputation? Offering a fair split (eg, 50/50 or 60/40) may align with your personal brand of fairness and generosity
• Pragmatism and Efficiency: You might estimate the minimum “acceptable” amount the responder might agree to while still appearing reasonable. Perhaps this might be a 70/30 or 60/40 split, giving the responder enough to feel valued without “overpaying”
• Influence of Perceived Power: Entrepreneurs accustomed to negotiations might offer slightly less than half, assuming they can justify the split through their role as the proposer. For instance, a 60/40 split might reflect the mindset: I took the initiative, so I deserve a larger share

What do you think? Do any of these rationales sound feasible?

What if I were to suggest that many successful, multi-millionaire entrepreneurs might propose a 0/100 split, giving all money to the responder / buyer? How is that even viable? Check out this video from Daniel Priestley below:

https://www.linkedin.com/posts/danielpriestley_you-have-100-in-20-notes-you-have-to-activity-7279768426665918465-9UWK

Why Would They Give It All?

• Building Trust and Goodwill: Giving the full $100 signals overwhelming generosity and trust. This gesture can forge a powerful sense of goodwill and strengthen relationships, especially if there’s an expectation of future interactions
• Cultivating a Partnership: The responder would likely feel indebted to the proposer. This perception of being partners could lead to future cooperation or opportunities that far outweigh the immediate $100
• Signalling Abundance: Entrepreneurs who adopt a mindset of abundance, rather than scarcity, demonstrate confidence in their ability to create wealth or value. Giving it all away showcases that they are not constrained by immediate gains but focus on larger objectives
• Differentiation: Most participants in the Ultimatum Game act out of fairness or self-interest. By giving everything, an entrepreneur signals they think differently, breaking conventional norms and potentially leaving a lasting impression
• Testing the Responder’s Values: Some entrepreneurs might see this as an experiment: If I give everything, will the responder reciprocate or take advantage? This can provide valuable insight into the other person’s character and willingness to collaborate
• Reciprocity as a Multiplier: The responder, feeling grateful, might reciprocate in unexpected ways—offering resources, connections, or opportunities that outweigh the $100
• Enhanced Reputation: If the interaction is public or becomes known in a community, the entrepreneur’s generosity could enhance their reputation as a fair, forward-thinking leader, potentially attracting more significant opportunities
• Relationship ROI: By focusing on the responder’s feelings and experience rather than the immediate financial outcome, the entrepreneur invests in the long-term potential return on investment (ROI) of the relationship.

Most people, including entrepreneurs, view the Ultimate Game (and OSS procurement events) transactionally. The idea of giving everything may seem risky or irrational. However, advanced entrepreneurs aim to generate exponential returns over the long term rather than incremental, transactional gains. They’re not thinking of the initial $100, but the $1m of joint value created over the longer timeframe.

At the start of this article we told you we’d share an interesting observation relating to open-source vendor negotiations.

In our procurement events, we often see open-source and proprietary vendors pitted against each other. I can’t say for sure whether it’s:

• The buyer’s perception of the vendor being more altruistic and partnership-focused with regards to contractual T&Cs
• The vendor’s long game mindset helping buyers avoid the big up-front cost/risk/fear hurdle of starting an OSS transformation
• The law of reciprocity after buyers get the software for free
• Inherent trustworthiness of vendors willing to “donate” their products, or
• Some other mix of drivers

but it seems that negotiations between open-source vendors and buyers tend to be significantly less “lumpy,” confrontational and complex than negotiations between proprietary vendors and buyers.

Why do you think this happens? If you’re a proprietary product vendor, what can you take away from this?

Does the Ultimate Game give you a different perspective on the behavioural dynamics at play during an OSS procurement event?

Leave us a comment below!

* If you’d like to hear more about how PAOSS helps to reduce the size, duration and cost of the typical OSS procurement event, leave us a message via our contact form below