Consider the same ultimatum game as in the previous question but consider some new preferences reflecting a desire for fairness. In particular,now assume players get 1 util per dollar earned but lose 1/4 util for the absolute difference between their monetary payoffs. Which of the following is an offer that arises in a subgame-perfect equilibrium with these new preferences?

Question

Quizplus · Accepted Answer

With the new preferences, players value fairness and are penalized for disparities in payoffs. An offer of 2 ensures a fairer distribution, minimizing the utility loss from the absolute difference in payoffs, and is likely to be accepted, making it a subgame-perfect equilibrium.

Consider the Same Ultimatum Game as in the Previous Question