PM The Ultimatum Game is a simple game that has been played as an economi choose

Question

PM The Ultimatum Game is a simple game that has been played as an economi choose any amount to be deducted from the $20 and given to player both get nothing. t. In the game, player 1 is given $20 and may 2. (The players do not see each other and cannot communicate.) er accept or reject the ofter. If player 2 accepts it. each player receives the share indicated. If player 2 rejects it. then 2.2. Results of many repeated experiments involving the Uitdmarum Game tor player 2even when the amount of money represents several month's pay A. show that the prediction of neoclassical theory is incorrect: rejects offers of B. show that it is better to be player 1 than pla offer C. show that it is better to be player 2 than player 1: can accept or reject an offer D. show that the prediction of neoclassical theory is correct accepts all non-zero ofters no matter how low yer 2: can only accept or reject an offer. but player 1 gets to make the Continue

Explanation / Answer

Answer: option A.

The result of the ultimatum game among shared social group has showed that people rejects offer of less than 30%. It has been studied that people often take unfair offer while taking too much time in decision making. When second player chooses to accept the low offer, low payoff gives him/her greater utility than getting nothing by rejecting the offer. There are some players, who reject the offer may be due to having that power. In that case the objective function of the second player is not maximising social or individual benefits. Therefore, rejection is not a rational decision in this game.

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