Scenario: the Ultimatum Game Is a Two-Player Game Played as Follows

question 84

Multiple Choice

Scenario: The ultimatum game is a two-player game played as follows. One player, the proposer, is told to divide a sum of money between the two players. The proposer proposes how to divide the sum. The other player, the responder, then chooses to either accept or reject the proposal. If the responder accepts the proposal, the money is split according to the proposal. If the responder rejects the proposal, neither receives any money. When this game is played by real people from a common social group, it is frequently observed that the proposer offers close to 50-50 split and the responder rejects offers below 30 percent of the sum.
-Refer to the scenario above.According to the theory presented in the textbook,if the proposer offered 1 percent,should the responder accept?

• A) Yes, because, if the responder rejected the offer, he will end up with nothing.
• B) Yes, because 1 percent is the maximum the proposer will ever offer.
• C) No, because, if the responder rejected the offer, he will get more.
• D) No, because, 1 percent is the minimum the responder can expect from the proposer.

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Definitions:

Bromides

Commonplace remarks or clichés that lack originality or interest.

Platitudes

Overused statements or cliches that often lack originality or significance.

Pareto Efficient Allocation

A situation in economic theory where resources are allocated in such a way that it is impossible to make any one individual better off without making at least one individual worse off.

Pareto Optimal Allocation

A resource distribution scenario where no individual can be made better off without making at least one individual worse off.