Standard game theory predicts a solution to the ultimatum game that is rarely observed when people actually play the game. The key reason that behavioral economists believe the predicted and observed outcomes differ is because people account for ________ of the outcome when making decisions.
A) loss aversion
B) fairness
C) efficiency
D) utility

Question

Quizplus · Accepted Answer

Behavioral economists believe that people account for fairness, or the perceived fairness of the outcome, when making decisions in the ultimatum game. This is why the predicted outcome (the proposer offering the smallest possible amount and the responder accepting it) is rarely observed in actual play.

Standard Game Theory Predicts a Solution to the Ultimatum Game