Bill and Bev are playing the ultimatum game, starting with $50. A coin flip results in Bev being the one to propose a division of the $50. If Bev acts as economic theory assumes, she should propose that
A)she gets $30 and Bill gets $20.
B)she gets $25 and Bill gets $25.
C)she gets $24 and Bill gets $26.
D)she gets $49 and Bill gets $1.

Question

Quizplus · Accepted Answer

Economic theory assumes that individuals act rationally to maximize their own utility. In the ultimatum game, Bev should propose a division that maximizes her share while still being acceptable to Bill. Theoretically, she should propose $49 for herself and $1 for Bill, as Bill would still receive more than nothing, which is the alternative if he rejects the offer.

Bill and Bev Are Playing the Ultimatum Game, Starting with $50