Cilus and Roseanne Are Playing an Ultimatum Game Where Cilus

question 103

Essay

Cilus and Roseanne are playing an ultimatum game where Cilus is given $50 and asked to propose a way of splitting it with Roseanne.When Roseanne learns Cilus's proposal,she chooses whether to accept or reject the split.If Roseanne accepts the split,both players receive the money according to Cilus's split proposal.If Roseanne rejects the split,both players receive nothing.This game will be played only once,so Cilus does not have to worry about reciprocity when making his choice.Assume that split proposals can be made only in increments of $1.
According to traditional economic theory,which presumes that both players are fully rational and wish to maximize their incomes,what is the outcome of the game? Why is this outcome not observed very often in experimental settings?

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Definitions:

Journal Entries

The written records of financial transactions in the accounting system, indicating the accounts and amounts debited and credited.

Journal Entries

Journal entries are the initial records of financial transactions in the accounting system, documenting the details of each transaction in chronological order.

Bank Reconciliation

The procedure of ensuring the balances of a cash account in a firm's accounting books match the corresponding figures on a bank statement.

Cash Account

An account used to record cash transactions in a company's financial statements, including inflows and outflows of cash.