Consider a Version of the Ultimatum Game in Which Player

question 6

Multiple Choice

Consider a version of the ultimatum game in which player A makes an integer offer {1,2 …,9} to player B. If B accepts,he or she gets that amount of money and A gets to keep the remainder of $10. If B rejects,both get nothing. Which of the following is an offer that arises in a subgame-perfect equilibrium assuming players only care about monetary payoffs?

• A)1.
• B)2.
• C)4.
• D)5.

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Definitions:

Piece-rate

A payment method where workers are paid a fixed rate for each unit of production completed, encouraging productivity by directly linking pay to output.

Moral Hazard

A situation where one party takes on excessive risk because the negative consequences of the risk will be borne by another party.

Antilock Brakes

A safety system in vehicles that prevents the wheels from locking up and skidding during braking, improving control.

Self-medicating

The practice of using drugs, alcohol, or other substances to treat one's ailments without professional guidance, which can lead to misuse and health problems.