Consider the Following Scenario to Answer the Questions That Follow

question 13

Multiple Choice

Consider the following scenario to answer the questions that follow.
Derek and Heriberto are playing an ultimatum game where Derek is given $500.00 and asked to propose a way of splitting it with Heriberto. When Heriberto learns Derek's proposal, Heriberto chooses whether to accept or reject the split. If Heriberto accepts the split, both players receive the money according to Derek's split proposal. If Heriberto rejects the split, both players receive nothing. This game will be played only once, so Derek does not have to worry about reciprocity when making his choice.
-Suppose that Derek proposes a split such that Derek will receive $489.99 and Heriberto will receive $10.01.Traditional economic theory predicts that Heriberto will:

• A) accept the $10.01 because he values receiving $10.01 more than receiving nothing.
• B) accept the $10.01 because he wishes to punish Derek for proposing such an unfair split.
• C) reject the $10.01 because he wishes to punish Derek for proposing such an unfair split.
• D) reject the $10.01 and also would have rejected a split such that Derek receives $250.00 and Heriberto receives $250.00.
• E) sometimes accept the $10.01 and sometimes reject the $10.01, depending on his mood at the time.

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Definitions:

Vendors And Suppliers

Businesses or individuals that provide products or services to other entities as part of the supply chain.

Payments

Transactions involving the transfer of money or valuables in exchange for goods, services, or to fulfill obligations.

Cost Reimbursable Contract

A type of contract where the purchaser agrees to pay the supplier for actual costs incurred plus a fee or profit.

Fixed Fee

A pre-determined and agreed-upon total charge for a specific service or project, not subject to change based on the amount of time or resources used.