Reese and Rebecca are playing an ultimatum game where Reese is given $100 and asked to propose a way of splitting it with Rebecca.When Rebecca learns Reese's proposal,she chooses whether to accept or reject the split.If Rebecca accepts the split,both players receive the money according to Reese's split proposal.If Rebecca rejects the split,both players receive nothing.This game will be played only once,so Reese does not have to worry about reciprocity when making his choice.
Suppose that Reese proposes a split such that Reese will receive $99.99 and Rebecca will receive $0.01.Traditional economic theory predicts that Rebecca will
A) accept the $0.01 because she values receiving $0.01 more than receiving nothing.
B) accept the $0.01 because she wishes to punish Reese for proposing such an unfair split.
C) reject the $0.01 because she wishes to punish Reese for proposing such an unfair split.
D) reject the $0.01 and also will reject a split such that Reese receives $50.00 and Rebecca receives $50.00.
E) sometimes accept the $0.01 and sometimes reject the $0.01,depending on her mood at the time.

Question

Quizplus · Accepted Answer

CTraditional economic theory posits that rational agents will accept any amount of money that is greater than nothing, as it increases their utility (A). However, behavioral economics suggests that individuals value fairness and may reject unfair offers to punish the proposer, even at a cost to themselves (C).

Reese and Rebecca Are Playing an Ultimatum Game Where Reese