Game theory tells us that in the ultimatum game
A) The threat to reject is credible
B) The threat to reject in not credible
C) People are expected to give more under a threat of rejection
D) A and C

Question

Quizplus · Accepted Answer

In the ultimatum game, the proposer offers a certain amount of money to the responder, who then decides whether to accept or reject the offer. If the responder accepts, they receive the money offered, and if they reject, both players receive nothing. The threat to reject is not credible because even if the responder is offered a small amount of money, they are still better off accepting it rather than getting nothing. Therefore, the optimal strategy for the responder is to accept any offer, no matter how low, which makes the proposer's offer power weaker. Therefore, the proposer is more likely to offer a fair amount because they know that the responder has nothing to lose by rejecting the low offers.  Hence, option B is the correct answer.

Game Theory Tells Us That in the Ultimatum Game