Ultimatum Game
Negotiation with a twist
The ultimatum game is a game theory framework that involves two players, a proposer and a responder, who must agree on the division of a sum of money. The proposer makes an offer, and the responder can either accept or reject it. If the responder rejects the offer, both players receive nothing. The game is typically played only once, and the players do not know each other's identities. The ultimatum game is used to study human behavior in negotiations and the role of fairness and altruism in decision-making.
- People bring many considerations and preferences into their choices besides their own rewards.
- Concerns for fairness or altruism play a significant role in decision-making.
- Game theorists should include in their analysis of games the players' concerns for equity, altruism, and similar concerns.
- Proposer makes an offerThe proposer makes an offer to the responder, who can either accept or reject it.Pro tipThe proposer should consider the responder's potential reaction to the offer.WarningThe proposer should be aware that the responder may reject the offer if it is perceived as unfair.
- Responder accepts or rejects the offerThe responder can either accept the offer, in which case the game ends, or reject it, in which case both players receive nothing.Pro tipThe responder should consider the potential consequences of rejecting the offer.WarningThe responder should be aware that rejecting the offer may result in both players receiving nothing.
Numerous experiments have been conducted on the ultimatum game, with results showing that people tend to be fair and altruistic in their decisions.
The ultimatum game has been used to study real-world negotiations, such as business deals and international relations.
The ultimatum game was first introduced by Werner Güth in 1982. It has since been widely used in experimental economics and game theory to study human behavior in negotiations.