Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 18, Problem 7P
To determine
Traditional economic equilibrium when the responder is the first player in the equilibrium game and if the result is consistent with practical results.
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Two players play the Ultimatum Game, in which they are to split $20. A purely rational agent would only reject an offer of …
Two players play the Ultimatum Game, in which they are to split $20. A purely rational agent would only reject an offer of …
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-$20
-$19
-$1
-$0
-$10
Suppose Justine and Sarah are playing the ultimatum game. Justine is the proposer, has $140 to allocate, and Sarah can accept or reject the offer. Based on repeated experiments of the ultimatum game, what combination of payouts to Justine and Sarah is most likely to occur?.
Chapter 18 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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- Assume that a proposer and a respondent are playing an ultimatum game where they split a pie of Rs. 100. What is the backward induction equilibrium of this game? In a laboratory experiment we see that offers from the proposer averaging Rs. 20 are routinely rejected by the respondent. Name one theory that has been used to offer an explanation for this observation. Using that theory what modifications of agent utility functions are needed for such outcomes as described above to be equilibrium?arrow_forwardWe learned that we can use choice between a gamble over someone's best and worst outcomes and getting an outcome of interest (like getting pizza) for certain as a way to assign numeric values to utility (on a scale of 0 to 1). Using this method, if you are indifferent between the following: A gamble that has a 0.3 chance of your best possible outcome (and no lower chance), and a 0.7 chance of your worst possible outcome. Getting pizza for certain. it means that your utility for getting pizza is:arrow_forwardEconomics Consider the ultimatum and dictator games. a) Briefly explain the general experimental findings about how individuals play these games. How do they compare with the game theoretic predictions? b) How do social preferences explain behavior in these experiments? c) Real world experiences have an impact on experimental behavior. Explain how real world experiences could affect behavior in each of theses experiments. d) Suppose that you would like to increase the amount that is sent in these experiments. Can you think of a way to to this? e) Suppose that individuals play first a dictator game and then an ultimatum game with the roles reversed, i.e. the sender in the dictator game is the receiver in the ultimatum game. Given what you know about individuals' behavior, how do think that players will play? Explain. youarrow_forward
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