Anthony and Addie Are Playing the Ultimatum Game, Starting with $100

question 383

Multiple Choice

Anthony and Addie are playing the ultimatum game, starting with $100. The coin flip results in Anthony being the one to propose a division of the $100. Anthony proposes that he gets $99 and Addie gets $1. Which of the following statements is correct?

• A)Because the 99-1 split isn't fair, Anthony should not make this offer.
• B)Conventional economic theory predicts that Anthony will propose a 99-1 split, just as he did.
• C)Experimental evidence suggests that Addie will accept the 99-1 split because, even though it isn't fair, it's better than nothing.
• D)Economic theory predicts that Anthony should choose a 60-40 split to maximize his payoff.

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Definitions:

NAFTA

The North American Free Trade Agreement, a treaty made to eliminate trade barriers between the U.S., Canada, and Mexico.

Financial Investments

Assets acquired with the goal of generating income or appreciating in value, such as stocks, bonds, or real estate.

Scientific Evidence

Information that has been collected systematically following scientific methods, intended to support or disprove theories or hypotheses, and is often used in legal and regulatory decision-making processes.

WTO

World Trade Organization; an international body that regulates and facilitates global trade by establishing trade agreements and resolving disputes among member countries.