Reese and Rebecca Are Playing an Ultimatum Game Where Reese

question 79

Multiple Choice

Reese and Rebecca are playing an ultimatum game where Reese is given $100 and asked to propose a way of splitting it with Rebecca.When Rebecca learns Reese's proposal,she chooses whether to accept or reject the split.If Rebecca accepts the split,both players receive the money according to Reese's split proposal.If Rebecca rejects the split,both players receive nothing.This game will be played only once,so Reese does not have to worry about reciprocity when making his choice.
Suppose that Reese proposes a split such that Reese will receive $99.99 and Rebecca will receive $0.01.Traditional economic theory predicts that Rebecca will

• A) accept the $0.01 because she values receiving $0.01 more than receiving nothing.
• B) accept the $0.01 because she wishes to punish Reese for proposing such an unfair split.
• C) reject the $0.01 because she wishes to punish Reese for proposing such an unfair split.
• D) reject the $0.01 and also will reject a split such that Reese receives $50.00 and Rebecca receives $50.00.
• E) sometimes accept the $0.01 and sometimes reject the $0.01,depending on her mood at the time.

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Definitions:

Consolidated Statement

A financial statement that aggregates the financial position and operations of a parent company and its subsidiaries, presenting them as a single economic entity.

Income Tax Calculations

The process of determining the tax payable to the government based on earned income, after allowances and deductions are applied.

Outstanding Common Shares

Refers to the total number of shares of a corporation that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares.

Deferred Income Tax

Income tax obligations that a company has accrued but not yet paid, appearing on the balance sheet as a liability.