The responder in an ultimatum game is likely to reject an offer of 10% of $1 but is less likely to reject an offer of 10% of $100. What is the reason behind such inconsistent behavior?
What will be an ideal response?
A responder in an ultimatum game rejects an offer made by the proposer if he prefers fairness to money. However, as the opportunity cost of exercising fairness increases, the responder is less likely to exercise fairness. Therefore, a responder who rejects an offer of 10% of $1 is less likely to reject an offer of 10% of $100.
Economics
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