Consider a Variant oF the uitimatum qame we Studicd inclasSin which players have Fairness considerations. The timingOF the qame is vsual. First , Player 1 propasar the split(100 -x, x)XE [0,100]. Player 2 observes split & decides whether to accept(in which case they recieve Moncy according proposed Split)or reject (in Which case they both get žero dollars).Butnow player i's utility equals to her monetary Vtility minusthe disutility From unFairneas proportion al to the diFfrenein Monetary outCOMES . That is, given a final Split (m. ,m.) letOF a hundred dollars to player 2,Whereu, (m. ,m.) = m, -B. (m, - m2)*Ui (m.,m.)= m, - P. (m, -m.)Where Pi,Pz are parametens of the game indicating haw stronglyPlayers care a bout Fairness. Noté that the case weConsidered corres pandsto B, = Bz =0Let B,=07,10(a) Which oFFes will player 2.derinitelyallept ? revect ? Describe all sequentially rational StrategiesFor player 2.(b) For cach seqventialy ratianal Strategyof player 2 you identiFied in part (a) ,tither describeWhi ch proposal Maxi mizer player 1's continuationvalve or explain Why it does not existC pescribe alI SPNE'OF+hegame.

IntroductionThe ultimatum game described human unwillingness about injustice. Fairness can be…

Consider a Variant of the ultimatum game we studied in class in which players have Fairness considerations. The timing of the game is usual. First, Player 1 proposes the split (100-X, X) OF a hundred dollars to player 2, where XE [0,100]. Player 2 observes split & decides whether to accept (in which case they recieve money according to proposed Split) or reject (in which case they both get žero dollars). But now player i's utility equals to her monetary Utility minus

Consider a Variant of the ultimatum game we studied in class in which players have Fairness considerations. The timing of the game is usual. First, Player 1 proposes the split (100-X, X) OF a hundred dollars to player 2, where XE [0,100]. Player 2 observes split & decides whether to accept (in which case they recieve money according to proposed Split) or reject (in which case they both get žero dollars). But now player i's utility equals to her monetary Utility minus

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

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Question Completion Status: Gekko QUESTION 8 Good Quality a Poor Quality SERDE 1 INSGE 19 2 Good Quality Wonka 10 Gekko = 10 Wonka = 12 Gekko = 9 1 Wonka Refer to Table 17-7. Wonka and Gekko agree to cooperate so as to maximize total profit. If this game is played repeatedly and Wonka uses a tit- strategy, it will choose a O a. good quality product in the first round and in subsequent rounds it will choose whatever Gekko chose in the previous round. O b. poor quality product in all rounds, regardless of the choice made by Gekko. C. good quality product in all rounds, regardless of the choice made by Gekko. d. poor quality product in the first round and in subsequent rounds it will choose whatever Gekko chose in the previous round. Poor Quality Wonka = 9 Gekko = 12 Click Save and Submit to save and submit. Click Save All Answers to save all answers. Wonka = 11 Gekko = 11 O Pleshow! www 0 R Aa
a W 3,5 3,4 8,4 0,0 3,3 8,9 y 0,1 5,9 9,8 Describe a strategy for player 1 that dominates x. O (1/3.0. 2/3) 1.0,0) O01.1) to
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