Evaluating Motivations in Economic Games
In an economic game, a 'Proposer' offers a share of a sum of money to a 'Responder'. If the Responder accepts, the money is split as proposed. If the Responder rejects, both players receive nothing. An observer notes that Proposers in a specific community consistently offer a high share (e.g., 40-50%) to Responders. Two competing hypotheses are proposed to explain this behavior:
- The Altruism Hypothesis: The Proposers are genuinely concerned with fairness and the well-being of the Responders.
- The Strategic Risk Aversion Hypothesis: The Proposers are primarily self-interested and make high offers to avoid the significant risk of their offer being rejected, which would result in them receiving nothing.
Evaluate these two hypotheses. In your answer, describe what kind of evidence regarding the Responders' behavior would be needed to strongly support the Strategic Risk Aversion Hypothesis over the Altruism Hypothesis.
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Introduction to Microeconomics Course
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
Evaluation in Bloom's Taxonomy
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