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:

Legal Endorsement

Approval or sanction by a legal authority or body.

Misspelled Name

An error in the spelling of a name, often causing confusion or issues with identity or documentation.

Electronic Fund Transfer Act

A United States federal law designed to protect consumers engaging in electronic transfer of funds.

Transactions

The act of conducting business or other dealings between parties whereby goods, services, or something of value is exchanged.