Answered: In this version of the ultimatum game…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Question

In this version of the ultimatum game experiment, one participant is given £100, and is told to offer to split that amount with another participant. The second player can either refuse to accept the division, in which case the participant receiving the £100 has to give it back, or can accept the division, in which case, the player receiving the money splits the £100 as proposed.

We can explain how the participant who receives the money, and makes the proposal decides on it by arguing that

A) There is a need to appear fair, and that can be done by offering a quarter of the money (£25) to the other participant.

B) To avoid the risk of the offer being rejected, the optimal strategy is to offer whatever might be considered normal in such a situation, and this might be around £10.

C) Anticipating that the other player is rational, the optimal strategy is to offer the smallest possible amount (£0.01) on the basis that receiving something is better than receiving nothing at all.

D) There is a need to appear fair, and so the best strategy will be to offer half of the money (£50) to the other participant.

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