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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.

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.

Calculus For The Life Sciences
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter12: Probability
Section12.4: Discrete Random Variables; Applications To Decision Making
Problem 18E
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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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