In the ultimatum game, two strangers are given $50 and must decide how to split the money between them. One player, called the proposer, makes the initial decision on how to split the money. The second player, called the responder, either accepts or rejects the proposer's offer. If the responder accepts the offer, both players are paid according to the proposer's offer. If the responder rejects the offer, neither player receives any money. Suppose the proposer and responder act in a rationally self-interested manner. The proposer would offer $____ to the responder and the responder would ____ the offer.
A) 1; accept
B) 1; reject
C) 49; accept
D) 49; reject

Question

Quizplus · Accepted Answer

In a scenario where both players act in a rationally self-interested manner, the proposer would offer the smallest possible amount (in this case, $1) to maximize their own payoff, knowing that a rational responder would accept any amount greater than $0 since receiving $1 is better than receiving nothing.

In the Ultimatum Game, Two Strangers Are Given $50 and Must