Imagine: Two strangers play a game. The first, holding ten $1 bills, must divide the cash among the two. The only decision the second can make is whether or not to accept the split. If the answer is no, neither player will walk away with anything, and the $10 is forfeit.

Analyzing this game on the surface level, it is obvious what each player should do. Since the second gains nothing by rejecting an offer, he should always accept. Therefore, the first should offer just $1, knowing that the second must say yes, and she will walk away with his maximum take. Right?

This is the Ultimatum Game, invented in 1982, investigated in 1983, spectacularly relevant in 2009. In experimental trials, researchers found the average offer to be around 37% of the money, far greater than the minuscule percentage predicted. Furthermore, when the offer was less than 30% of the money, it was rejected over half the time.

That means that a significant percentage of players turned down free money, literally.

Any freshman in Econ 101 can tell you that people make decisions based on their own interest. We buy because we feel that what we’re getting is worth the price — in other words, when the cost is less than the sum of the benefits. I pay $100 a month for my trusty iPhone because continuing its service is of greater use to me than the $100. It’s easy to reel off what I’m getting: convenient communication, mobile email access, portable music, a status symbol.

When players reject an Ultimatum Game offer, they are receiving something, something worth the dough they’re leaving on the table. They’re receiving the joy of spite, which can be a valuable prize indeed. Its twin, the joy of benevolence, plays an equally important role. Players who offer a 50/50 split of the money are paying potential dollars for the satisfaction of having chosen the balanced option.

Call it the Judgment Factor: the change in value of a good or option or service derived from the pleasure of punishment or reward. Players considering a $9/$1 split have the opportunity to spite the other player by saying no. When the judgment factor is considered, the player no longer chooses between $1 and $0, but between $1 and $2 (or however much the joy of condemnation is worth to that individual). That difference is the judgment factor, and in business, it can be the difference between life and death.

Consider Whole Foods. Without the goodwill generated by their social efforts and green philosophy, you’d never have heard of them. Their customers are willing to pay a premium, often for products their cheaper competitors carry, because they enjoy helping a company that does what they think companies should do, a company that acts as they think companies should act.

Likewise, companies with negative judgment factors are forced to lower prices, often below the point of profitability.

In the marketplace we must continually assess our judgment factors, the premiums customers are willing to reward us with. Few elements of a consumer’s buying decision are so often overlooked. Every time your company interacts with a customer, directly or indirectly, he’s assessing your performance, preparing to reward or punish you when it comes time to make a decision.

Embrace the judgment factor. Make your customers feel like they’re getting something extra when they buy what you’re selling. You’re constantly being evaluated, from your corporate behavior to your marketing and identity.

The verdict is imminent. Are you ready?

Read more about the Ultimatum Game