The ultimatum game

The ultimatum game has been used to demonstrate that human beings are not objective, rational actors when it comes to some economic issues. Participants are typically put in a situation where they are offered money for nothing other than participation in the game. However, if the conditions of the game infringe upon their sense of fairness, the money will often end up being rejected.

One of the two players in the ultimatum game is typically given a set amount of cash; their job is to offer a partner some percentage of that cash. The partner can then choose to accept the offer or reject it; in the latter case, neither player ends up with money. When the split is 50-50 or above, nearly all offers are accepted. As players offer decreasing fractions, rejection rates climb. By the time a person is offered 20 percent or less, most offers are rejected.

From a purely rational economic perspective, any offer should be accepted, since any money will be better than being left empty handed. From a social perspective, though, individuals will attempt to enforce a fair division of resources. A rejection will mean that the person making the offer is punished for making an offer that's viewed as unfair. Some studies, however, have shown that people will reject offers they perceive as unfair even if it does not result in punishment.

Many variations of the ultimatum game have been used to better understand human behavior in economic situations.

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