If You Are Assigned the Role of Player a in the Ultimatum

question 396

Multiple Choice

If you are assigned the role of Player A in the Ultimatum game and you propose that player B gets $1 and you get $99

• A)you are behaving as a rational wealth-maximizer and player B is likely to accept your offer.
• B)you are behaving as a rational wealth-maximizer and player B is likely to reject your offer.
• C)you are not behaving as a rational wealth-maximizer and player B is likely to accept your offer.
• D)you are not behaving as a rational wealth-maximizer and player B is likely to reject your offer.

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Definitions:

Expected Return

The predicted average of possible returns for an investment, accounting for the probability of each outcome and its associated return.

Risk-Adjusted Discount Rate

A discount rate that adjusts for the risk of the cash flows, giving a more accurate present value estimate.

Market Return

The total return on investment, including dividends and capital gains, from holding a market portfolio.

Nondiversifiable Risk

A type of risk that affects all investments across the market and cannot be eliminated through diversification.