Observed Ultimatum Game Outcomes vs. the Homo Economicus Model
Experimental findings from the ultimatum game are inconsistent with the behavior predicted by the Homo economicus model, which assumes actors are purely self-interested. For instance, the model predicts Proposers would offer the smallest possible amount, but experimental results show most Proposers offer more. These observations, which are similar to findings from public good game experiments, indicate that social norms and social preferences like fairness and reciprocity play a crucial role in economic decision-making, contradicting the purely self-interested model.
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CORE Econ
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
Ch.5 The rules of the game: Who gets what and why - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Observed Ultimatum Game Outcomes vs. the Homo Economicus Model
A government policy that imposes a high tax on the production of goods that create significant air pollution is primarily intended to increase government revenue for funding public services.
In a one-time interaction, a 'Proposer' is given $10.00 and must offer a portion of it to a 'Responder'. The Responder can either accept the offer, in which case the money is split as proposed, or reject it, in which case both individuals receive nothing. Assuming both players are perfectly rational, only care about maximizing their own monetary gain, and the smallest unit of currency is one cent ($0.01), what is the predicted outcome of this interaction?
Analyzing Decisions in a Bargaining Scenario
Proposer's Rationale in a Bargaining Scenario
In a one-shot bargaining game, a Proposer is given a sum of money to split with a Responder. The Proposer makes an offer, and the Responder can either accept it (they both get the proposed shares) or reject it (they both get nothing). If both individuals are perfectly rational and care only about maximizing their own monetary gain, the Proposer will offer the smallest possible positive amount, and the Responder will accept. Which statement best evaluates this outcome?
Evaluating a Bargaining Decision
Deconstructing Rational Decisions in a Bargaining Game
In a one-shot bargaining game, a Proposer offers a split of a sum of money to a Responder. The Responder can accept the offer, or reject it, in which case neither player receives anything. Assuming both players are perfectly rational and only seek to maximize their own monetary gain, match each component of the theoretical model to its correct description.
In a one-time bargaining game where a sum of money is to be split, if a Proposer and a Responder are both acting solely to maximize their own individual monetary gain, the Proposer's decision on what to offer is made without considering the Responder's potential reaction.
A 'Proposer' is given a sum of money to split with a 'Responder' in a one-time interaction. If the Responder rejects the offer, neither person gets any money. Assuming the Proposer is perfectly rational and solely motivated by maximizing their own monetary gain, arrange the following steps of their decision-making process into the correct logical order.
Proposer's Rationale in a Bargaining Scenario
Observed Ultimatum Game Outcomes vs. the Homo Economicus Model
Comparison of Ultimatum Game Responses: Kenyan Farmers vs. US Students
Responder Competition Lowers Rejection Rates Due to Uncertainty
Dictator Game
Power Assignment in Experimental Games vs. Real Economies
Government Income Support Increases Employee Bargaining Power
Consumer Structural Power from Competition
Consider two distinct one-time bargaining situations involving a Proposer and a Responder who must agree on how to split $100.
Situation 1: The Proposer makes a take-it-or-leave-it offer. If the Responder accepts, they split the money as proposed. If the Responder rejects, both get nothing.
Situation 2: The Proposer dictates the split, and the Responder automatically receives their share with no ability to reject the offer.
How does the change in rules from Situation 1 to Situation 2 affect the relative bargaining power of the Proposer and the likely outcome?
Impact of Competition on Bargaining Outcomes
Consider three different one-time bargaining scenarios over a sum of $100. Arrange these scenarios in order from the one that gives the Proposer the MOST bargaining power to the one that gives the Proposer the LEAST bargaining power.
Analyzing the Impact of a Modified Rejection Payoff
Evaluating Rule Structures for Equitable Bargaining
In a strategic interaction where one person (the Proposer) offers to split a sum of money with another person (the Responder), match each modification to the rules with its most likely effect on the balance of bargaining power.
True or False: Consider a one-time bargaining situation where a Proposer offers a split of $100 to a Responder. If the rule is changed from 'a rejection means both players get $0' to 'a rejection means the Responder gets $10 and the Proposer gets $0', this change in rules decreases the Responder's bargaining power.
In a one-time bargaining interaction, a Proposer offers to split $100 with a single Responder. If the Responder rejects the offer, both individuals receive nothing. If the rules are changed so that the Proposer makes an offer to two Responders simultaneously, and the split is finalized with the first Responder to accept, the introduction of this competition is expected to cause the average offer amount accepted by a Responder to ________.
Analyzing the Impact of an Outside Option on Bargaining Power
A research institute is studying how different rule structures affect negotiation outcomes. They set up four different scenarios for a Proposer to split a $100 prize with a Responder. In which of the following scenarios does the Proposer have the most structural power, making a highly unequal split (e.g., the Proposer keeping almost everything) the most probable outcome?
How Game Rules Shape Bargaining Power in the Ultimatum Game
Impact of a Responder's Outside Option on Ultimatum Game Outcomes
Learn After
Rejection of Hyper-Fair Offers Due to Inequality Aversion and Social Debt
Pricing Strategy in a Competitive Agricultural Market
In a one-time, anonymous interaction, Player A is given $100 and must propose a split with Player B. Player B can either accept the split, in which case they both get the proposed amounts, or reject it, in which case both players get $0. A model assuming players are purely self-interested predicts Player A will offer the smallest possible amount (e.g., $1) and Player B will accept it. However, experiments consistently show different results. Which of the following findings best explains the discrepancy between the prediction and the observed reality?
Analyzing Decision-Making in a Bargaining Experiment
Evaluating the Predictive Power of the Self-Interest Model
In a one-shot ultimatum game, a theoretical model assuming purely self-interested actors makes different predictions than what is typically observed in real-world experiments. Match each player's role and context (theoretical vs. observed) with the corresponding decision-making behavior.
The frequent rejection of offers below 20% of the total sum in one-shot, anonymous bargaining experiments provides strong evidence for the economic model that assumes individuals are purely self-interested and seek to maximize their own material payoff.
Interpreting Experimental Bargaining Results
In numerous one-shot, anonymous bargaining experiments, a significant number of participants who are offered a small portion of a total sum (e.g., 20% or less) choose to reject the offer, resulting in both participants receiving nothing. What is the most significant implication of this consistent experimental finding for economic theory?
Interpreting Experimental Bargaining Data
In a one-shot, anonymous bargaining experiment, a Proposer is given $20 to split. The Proposer offers $2 to the Responder. The Responder rejects the offer, resulting in both players receiving $0. Which fundamental assumption of a purely self-interested economic model is most directly contradicted by the Responder's action?
Analyzing Decision-Making in a Bargaining Experiment