Consider the accompanying decision tree and information to answer the questions that follow.
The decision tree depicts two players (Jane and Aaron) playing an ultimatum game where Aaron is given $1,000 and asked to propose a way of splitting it with Jane. When Jane learns Aaron's proposal, Jane chooses whether to accept or reject the split. If Jane accepts the split, both players receive the money according to Aaron's split proposal. If Jane rejects the split, both players receive nothing. This game will be played only once, so Aaron does not have to worry about reciprocity when making his choice.
There are four sets of payoffs at the terminal nodes of the decision tree. In each node, the dollar amount to the left of the comma represents Aaron's payoff, and the dollar amount to the right of the comma represents Jane's payoff.

-What is the likely outcome of the game if Aaron chooses to make a fair proposal?
A) Jane will reject and Aaron will receive a payoff of $999.
B) Jane will reject and Aaron will receive a payoff of $500.
C) Jane will accept and Aaron will receive a payoff of $500.
D) Jane will reject and Aaron will receive a payoff of $1.
E) Jane will reject and Aaron will receive a payoff of $0.

Question

Consider the accompanying decision tree and information to answer the questions that follow.
The decision tree depicts two players (Jane and Aaron) playing an ultimatum game where Aaron is given $1,000 and asked to propose a way of splitting it with Jane. When Jane learns Aaron's proposal, Jane chooses whether to accept or reject the split. If Jane accepts the split, both players receive the money according to Aaron's split proposal. If Jane rejects the split, both players receive nothing. This game will be played only once, so Aaron does not have to worry about reciprocity when making his choice.
There are four sets of payoffs at the terminal nodes of the decision tree. In each node, the dollar amount to the left of the comma represents Aaron's payoff, and the dollar amount to the right of the comma represents Jane's payoff.
 
-What is the likely outcome of the game if Aaron chooses to make a fair proposal?
A) Jane will reject and Aaron will receive a payoff of $999. 
B) Jane will reject and Aaron will receive a payoff of $500. 
C) Jane will accept and Aaron will receive a payoff of $500. 
D) Jane will reject and Aaron will receive a payoff of $1. 
E) Jane will reject and Aaron will receive a payoff of $0.

Quizplus · Accepted Answer

If Aaron makes a fair proposal (i.e. proposes to split the money equally), Jane is likely to accept it. This is because her payoff would be higher than if she rejects the proposal (in which case she gets nothing) and also higher than if she accepts an unfair proposal (where she may get only $100 or $200). Therefore, Aaron should propose to split the money equally to maximize his payoff.

Consider the Accompanying Decision Tree and Information to Answer the Questions