How does the Ultimatum Game work? What does experimental evidence show about the outcome of the Ultimatum game?
What will be an ideal response?
In the Ultimatum Game, half of the players (Proposers) are given some amount of money and are paired with other players (Responders) who start with nothing. The game is a sequential game that consists of two decisions. Proposers choose how much of the money they want to offer Responders. Each Responder then decides either to accept the Proposer's offer or to reject the offer, in which case both players walk away from the experiment empty handed.
Experimental evidence suggests that very low offers are often rejected. Proposers often understand that their low offers will likely be rejected, so they rarely offer extremely low amounts. Their offer is determined in part by how much they fear a rejection (and winding up with nothing). These experimental results are inconsistent with the theoretical predictions from game theory.
You might also like to view...
A game in which players as a group lose at the end of the game is referred to as
A) zero-sum game. B) negative-sum game. C) positive-sum game. D) tit-for-tat game.
The return to the entrepreneur for organizing, producing, and risk-taking in the operation of the business is
a. rent. b. equal to total revenue. c. equal to total cost. d. total profit.