Question

9. Suppose two players are playing the ultimatum game, and Player A has to propose a division of $100 between the two players. What is the Nash equilibrium for this game, and is it the usual result of the game when it is played? What does it tell us about people's attitudes towards fairness? 10. Provide three example of inconsistent choice over time 11. The marrying of the fields of psychology and economics has led to an explosion in the field of behavioural ecoromics. Give three explanatiors of some of the insights of behavioural economics and examples of when cach insight nr ight apply.

Answer 1

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Question 9)

   In the ultimatum game a proposer and responder need to decide how to split, a certain amount. The proposer moves first by making a take-it-or-leave-it-offer. The responder then either accepts the offer or rejects. If he accepts it, the deal is done. If he rejects both get nothing.

The responder should accept any positive offer - because something is better than nothing

Since player A is first mover so he will propose 100-e for himself & e to the other player, where e tends to zero.

Thus this is a general result .

But the fairness notion is not achieved