Robert and Neal are playing the ultimatum game, starting with $100. Based on the coin toss, Robert is the player to propose a division of the $100. If Robert acts as economic theory assumes and Neal acts as experimental evidence shows, Neal will
A)accept Robert's proposal of keeping $99 and offering Neal $1.
B)accept Robert's proposal of keeping $60 and offering Neal $40.
C)reject Robert's proposal of keeping $99 and offering Neal $1.
D)reject Robert's proposal of keeping $60 and offering Neal $40.

Question

Quizplus · Accepted Answer

Experimental evidence shows that people tend to reject proposals that are perceived as unfair, even if that means receiving nothing. In this case, if Robert were to propose keeping $99 for himself and only offering $1 to Neal, it is very likely that Neal would reject the proposal. On the other hand, if Robert were to propose a fairer split such as $60 for himself and $40 for Neal, it is more likely that Neal would accept the proposal. Therefore, the best choice for Neal is to reject an unfair proposal, which is represented by Choice C.

Robert and Neal Are Playing the Ultimatum Game, Starting with $100