Use the Following to Answer Questions

question 218

Multiple Choice

Use the following to answer questions :
Scenario I
The scenario describes research findings discussed in the following review article:
Cameron,C.C. ,& Thaler,R.H.(1995) .Anomalies: Ultimatums,dictators,and manners.Journal of Economic Perspectives,9(19) ,209-219.
In the ultimatum game,two participants are assigned to be either the "Divider" or the "Decider" by a coin flip.The Divider is given a sum of money,such as $10,and is instructed to offer some nonzero portion of it to the Decider.If the Decider accepts,she gets to keep what was offered and the Divider keeps the rest.If the Decider rejects the deal,both players get nothing.Both players are made aware of all these rules and then the game begins.Under these conditions,Dividers usually offer a little less than $5 and Deciders usually accept this amount.If Dividers offer less,Deciders often reject and both players get nothing.A similar game is termed the dictator game.Players are randomly assigned to be either the "Allocator" or the "Receiver." The Allocator is given a sum of money and makes a decision about how much money she would like to give the Receiver,who must accept this result.Allocators in this game usually offer some money to the Receiver but typically less than they offer the Dividers in the ultimatum game.
-(Scenario I) In the ultimatum game,the decision to reject an offer has been interpreted differently.One explanation is that Deciders seek,on principle alone,to exact retribution on Dividers who offer unfair deals.Another explanation is that rejecting unfair offers is part of a strategy to help ensure more fair deals in the future.Which strategy is the BEST way to evaluate these two explanations?

• A)Determine if Deciders are more or less likely to reject an unfair deal in which the Dividers change from trial to trial.
• B)Determine if Deciders are more or less likely to reject an unfair deal in multiple-trial games when they are always the Decider versus games in which they alternate between being the Divider and the Decider.
• C)Determine if Deciders would be equally likely to reject an unfair deal in the traditional game relative to the scenario in which they were told that the Divider usually makes fair deals.
• D)Determine if Deciders in multiple-trial games are more or less likely to reject an unfair deal if the deal on the previous trial also was rejected.

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Definitions:

Progressive Tax

At the individual level, a tax whose average tax rate increases as the taxpayer’s income increases. At the national level, a tax for which the average tax rate (= tax revenue/GDP) rises with GDP.

Average Tax Rate

Total tax paid divided by total taxable income or some other base (such as total income) against which to compare the amount of tax paid. Expressed as a percentage.

Highly Progressive

A tax system in which tax rates increase significantly as income or wealth rises.

Federal Spending

Expenditures by the federal government, which can include spending on defense, social security, health care, and infrastructure, among others.