Anomalies: The Ultimatum Game

February 16, 2021 Jeremiah Hendren

Anomalies: The Ultimatum Game

Thaler, Richard H.
Journal of Economic Perspectives 2, no. 4 (1988): 195-206

Imagine yourself in the following situation. Your daughter Eve, off at college, calls you to ask for your sage advice. She has agreed to participate in a laboratory experiment being run in the economics department at her college. The rules were explained in advance so that the subjects could think carefully about their choices. The experiment involves two-player bargaining, with Eve placed in the role of Player 1. She is to be given $10, and will be asked to divide it between herself and another student (Player 2) whose identity is unknown to her. The rules stipulate that she must make Player 2 an offer, and then Player 2 can either accept the offer, in which case he will receive whatever Eve offered him, or he can reject the offer, in which case both players will receive nothing. Her question to her wise economist parent: How much should she offer?

Richard Thaler

See this gallery in the original post