Consider an ultimatum game where the Proposer has $100 and offers a proportion of it to the Responder, who can either accept or reject the offer. If the Responder accepts, both kee... Consider an ultimatum game where the Proposer has $100 and offers a proportion of it to the Responder, who can either accept or reject the offer. If the Responder accepts, both keep the agreed share; if the Responder rejects, both receive nothing. Which of the following statements is correct?
Understand the Problem
The question is asking about the concepts involved in an ultimatum game in economics, specifically which statement regarding the rules and implications of the game is correct. It addresses the players' alternatives and potential outcomes based on their decisions.
Answer
The next best alternative for both players is $0.
The correct statement is: 'The next best alternative for both players is $0.'
Answer for screen readers
The correct statement is: 'The next best alternative for both players is $0.'
More Information
In the ultimatum game, the only alternative to accepting an offer is rejection, resulting in both players receiving nothing.
Tips
Common mistakes include assuming responders should reject offers they find unfair, disregarding the zero alternative.
Sources
- Ultimatum Game - an overview | ScienceDirect Topics - sciencedirect.com
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