games · decisions
Ultimatum game
You offer part of $10. The other player can accept or reject.
One player, the proposer, is given $10 and must offer some of it to a second player, the responder. The responder can accept or reject the offer. If the responder accepts, both players keep the amounts offered. If the responder rejects, both players get nothing. The proposer moves first. The responder sees the offer and decides.
You are the proposer. How much of the $10 do you offer the other player?
In pure self-interest the responder should accept any offer above zero, and the proposer should offer the smallest possible amount.
In real experiments many responders reject offers they see as unfair, often below 20-30%, and proposers usually offer more than the minimum. Here $2 is 20% of the $10, and $3 is 30%. An offer of $2 or less is rejected. An offer of $3 or more is accepted.
People care about fairness as well as money, and the power to reject can force a more equal split.