Strategic Risk Aversion as an Explanation for Kenyan Farmers' High Offers

Expected Payoff

Evaluating a Strategic Offer

In a one-shot interaction where a Proposer must offer a split of $100 to a Responder, the Proposer considers offering just $10. Which statement best analyzes the strategic trade-off the Proposer is facing with this low offer?

The Proposer's Dilemma: Analyzing Risk vs. Reward

Explaining the Proposer's Gamble

A Proposer in a one-shot interaction is deciding how to split $100. Match each potential offer strategy with the most accurate description of its associated risk and potential reward for the Proposer.

In a one-shot interaction where a Proposer must split a sum of money with a Responder, the Proposer's most rational strategy is always to offer the smallest possible non-zero amount, because any accepted offer is better than the zero-payoff outcome of a rejection.

The Proposer's Calculation

Two individuals, Alex and Ben, are each participating as a Proposer in a one-shot interaction where they must offer a split of $100 to an unknown Responder. If the Responder rejects the offer, both parties receive $0. Alex decides to offer the Responder $40. Ben decides to offer the Responder $10. Which of the following statements most accurately compares the strategic trade-off each Proposer is making?

Analyzing Strategic Offers with Probabilities

A Proposer in a one-shot interaction is deciding how to split $100 with a Responder. The Proposer believes there is a 50% chance the Responder will reject any offer below $30, but will certainly accept any offer of $30 or more. To maximize their own potential earnings from a purely self-interested standpoint, which offer should the Proposer make?