Jackie and Rhonda Are Playing an Ultimatum Game Where Jackie

question 123

Multiple Choice

Jackie and Rhonda are playing an ultimatum game where Jackie is given $100 and asked to propose a way of splitting it with Rhonda. When Rhonda learns Jackie's proposal, Rhonda chooses whether to accept or reject the split. If Rhonda accepts the split, both players receive the money according to Jackie's split proposal. If Rhonda rejects the split, both players receive nothing. This game will be played only once, so Rhonda does not have to worry about reciprocity when making her choice. Traditional economic theory presumes that:

• A) both players are irrational and wish to minimize the payoff to the other player.
• B) both players are irrational and wish to maximize their own payoff.
• C) both players are rational and wish to minimize their own payoff.
• D) both players are rational and wish to maximize their own payoff.
• E) the player that proposes the split is fully rational and wishes to maximize his or her own playoff, whereas the player that chooses to accept or reject the split is irrational and wishes to maximize the other player's payoff.

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Definitions:

Probability

The calculation of how probable it is for an event to happen.

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A die that is perfectly balanced, ensuring that each of its faces has an equal chance of landing upward when rolled.

Probability

A means of expressing an event's probability on a scale that ranges from 0 to 1.