Game theory tells us that in the ultimatum game:
A) the threat to reject is credible and is expected to increase the amount given.
B) the threat to reject in not credible, and is not expected to increase the amount given.
C) the threat to reject is credible, but is not expected to increase the amount given.
D) the threat to reject in not credible, but still is expected to increase the amount given.

Question

Quizplus · Accepted Answer

In the ultimatum game, the threat to reject is not credible because the responder is better off rejecting any offer less than their reservation price. However, the proposer still offers a fair amount (close to 50% of the total payoff) to avoid rejection and gain some payoff. Therefore, the threat to reject is not expected to increase the amount given, but still has an impact on the outcome of the game.

Game Theory Tells Us That in the Ultimatum Game