The Ultimatum Game is a simple game that has been played as an economic experime

Question

The Ultimatum Game is a simple game that has been played as an economic experiment. In the game, player 1 is given $20, and may choose any amount to be deducted from the $20 and given to player 2. (The players do not see each other and cannot communicate.) Player 2 may either accept or reject the offer. If player 2 accepts it, each player receives the share indicated. If player 2 rejects it. then both get nothing. 2.1. Neoclassical theory predicts that the rational strategy for player 1 is-, and the rational strategy for player 2 is O A. to give player 2 $10.00: to accept. O B. to give player 2 $5.00: to reject. O C. to give player 2 $20.00; to accept. O D. to give player 2 so.01; to accept Continue without saving

Explanation / Answer

Answer : 2.1) A. to give player 2 $10.00; to accept.

Because player 1 is given $20 from which he can anything amount to choose to give player 2 and player 2 can choose any strategy of accpet and reject. If player 2 reject then both the players get nothing but if player 2 accept then both of them get share. Therefore, player 2 select accept strategy and according to this (A) is the correct option from the given options.

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