In the Ultimatum Game, Two Strangers Are Given $50 and Must

question 97

Essay

In the ultimatum game, two strangers are given $50 and must decide how to split the money between them. One player, called the proposer, makes the initial decision on how to split the money. The second player, called the responder, either accepts or rejects the proposer's offer. If the responder accepts the offer, both players are paid according to the proposer's offer. If the responder rejects the offer, neither player receives any money.
a. Suppose the proposer and responder act in a rationally self-interested manner. What split would the proposer offer? How would the responder reply?
b. Suppose the proposer is altruistic. How might his behavior change?

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Definitions:

Peaked

Describes a data distribution's summit or highest point, indicating the mode or the most frequent value in the set.

Normal Probability Distribution

A bell-shaped distribution that is symmetrical about the mean, showing how data points are likely to be distributed in a set where most occurrences take place around the average.

Bell-shaped

A description often used for the symmetrical, rounded shape of a normal distribution curve.

Symmetric

In mathematics and statistics, symmetric indicates that a shape, function, or distribution is mirror-like, showing balance around a central point or axis.