Jackie and Rhonda are playing an ultimatum game where Jackie is given $100 and asked to propose a way of splitting it with Rhonda.When Rhonda learns Jackie's proposal,Rhonda chooses whether to accept or reject the split.If Rhonda accepts the split,both players receive the money according to Jackie's split proposal.If Rhonda rejects the split,both players receive nothing.This game will be played only once,so Rhonda does not have to worry about reciprocity when making her choice.Traditional economic theory presumes that:
A) both players are irrational and wish to minimize the payoff to the other player.
B) both players are irrational and wish to maximize their own payoffs.
C) both players are rational and wish to minimize their own payoffs.
D) both players are rational and wish to maximize their own payoffs.
E) the player that proposes the split is fully rational and wishes to maximize his or her own playoff, whereas the player that chooses to accept or reject the split is irrational and wishes to maximize the other player's payoff.

Question

Quizplus · Accepted Answer

Traditional economic theory assumes that both players are rational and want to maximize their own payoffs. Therefore, Jackie will propose a split that she believes will give her the largest share of the $100, and Rhonda will accept the split as long as it offers her some positive payoff. If Rhonda rejects the split, both she and Jackie receive nothing, which is a worse outcome for Rhonda than if she had accepted even a small share of the $100. Thus, Rhonda will likely accept Jackie's proposal unless the split is deemed too unfair.

Jackie and Rhonda Are Playing an Ultimatum Game Where Jackie