The decision tree depicts two players (Jane and Aaron) playing an ultimatum game where Aaron is given $1,000 and asked to propose a way of splitting it with Jane. When Jane learns Aaron’s proposal, Jane chooses whether to accept or reject the split. If Jane accepts the split, both players receive the money according to Aaron’s split proposal. If Jane rejects the split, both players receive nothing. This game will be played only once, so Aaron does not have to worry about reciprocity when making his choice.
There are four sets of payoffs at the terminal nodes of the decision tree. In each node, the dollar amount to the left of the comma represents Aaron’s payoff, and the dollar amount to the right of the comma represents Jane’s payoff.

-What is the likely outcome of the game if Aaron chooses to make a fair proposal?

Question

Quizplus · Accepted Answer

If Aaron makes a fair proposal, Jane is likely to accept the split since the split is equal. Both players would receive $500 each, which is the optimal outcome for both players.

If Aaron proposes an unfair split, Jane is likely to reject the split since she can only receive $0 or $500, and receiving $0 is worse than rejecting the split. Therefore, the best choice for Aaron is to make a fair proposal of splitting the money equally.

Note: The decision tree does not provide information about the players' preferences or strategies, but this is the likely outcome based on rational decision-making.

The Decision Tree Depicts Two Players (Jane and Aaron) Playing