What do you expect will happen to the amount

Reference no: EM132122978

Question: A common economic experiment is called the "ultimatum game." Subject A receives a small amount of cash, say $10. She can give some whole dollar amount to subject B, a stranger whom she cannot see and who cannot see her. If subject B approves of the amount he receives, both keep their portions of the $10. If subject B disapproves, they both get nothing.71

a. Can you show that if subject A is interested only in herself, her rational strategy is to give subject B $1 (Why not nothing?), and subject B's rational response is to accept that amount?

b. How might you explain the fact that in actual experiments the average amount offered by subject A (who is chosen at random) is an average of $3, and subject B (also chosen at random) usually accepts it?

c. What do you think happens to the average amount transferred by subject A and the probability that subject B will accept it if the setup is changed so that subject A wins her place as the giver by outscoring B on a short test of general knowledge? Explain.

d. What do you think happens to the average amount transferred and the probability of acceptance if subjects A and B are told they might be matched with each other to play the game again at some date in the future but do not know in advance who will be the donor and who the recipient?

e. If, instead of $10, subject A gets $200 to give away, what do you expect will happen to the amount she offers subject B? Why?

Reference no: EM132122978

Questions Cloud

Develop a critical understanding of the complex character : MPM7007: Management of Mega and Complex Projects - develop a critical understanding of the complex character, causes, and consequences of success and failure

Managing the activities of several fire companies : What level of administrative chief fire officer is responsible for managing the activities of several fire companies within a defined geographic area

Are human beings the pinnacle of evolution : 1. Why do you think that some species survive and evolve while others go extinct? 2. Are human beings the pinnacle of evolution?

How would they be required to account for any capital gain : HA3042 Assessment- Now is this loss allocated for tax purposes? If Joseph & Jane decide to sell property, how they required to account for any capital gain

What do you expect will happen to the amount : What do you think happens to the average amount transferred and the probability of acceptance if subjects A and B are told they might be matched.

Mid-latitude cyclones formally in that area : In what way was the 1993 "storm of the century" different in comparison to other mid-latitude cyclones formally in that area?

Determine the distance in kilometers : America at North Carolina to northwestern Africa at Mauritania (20°N latitude). Determine the distance in kilometers, then convert to centimeters.

What is the flux of energy coming into the upper surface : The solar panel has an albedo of 0.2. What is the flux of energy coming into the upper surface of the solar panel in Watts per square meter (W/m^2)?

What you have learned about models and heuristics : One of the most fact-filled publications you can buy is the Daily Racing Form. 72 For every horse running that day it contains about 30 facts.

User Account

All Pages