Game Theory - Ultimatum Game
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Take the most famous “Ultimatum Game” experiment in behavioral economics as an example. This experiment typically involves two participants, one of whom receives $100 and can freely allocate it between themselves and the other participant. They may keep it all, split it evenly, or give the majority to the other. The other participant has only two options: accept or reject. If they reject the proposer’s division, both go home empty‑handed.
I asked my friends for their views on this game, and surprisingly their opinions were both different and classic. One said, give one dollar to the other; if the other accepts, they get one dollar, if not, they get nothing. The other simply said to split it evenly.
If we analyze purely rationally, the responder benefits regardless of what the proposer offers, but if one seeks to maximize utility, it varies by individual. The responder might demand $99 while leaving only $1 for the proposer—would the proposer accept? It depends on personal differences, leading to varied negotiation outcomes.
In practice, many people who receive only a small amount reject the offer outright because they perceive unfairness and feel cheated, even though they end up with nothing. People may care less about the absolute amount and more about the relative share. This is an affect‑driven decision; most people make choices based on emotions. The proposer prefers to keep more, the responder wants to receive more, but they must consider the other’s feelings, otherwise both end up with nothing. Thus, under transparent information, a fair distribution of benefits seems more acceptable. A win‑win is not enough; people also want to feel respected emotionally. If you can move the other party, obtaining 80 % is not unreasonable. Alternatively, you could deceive the other by saying, “Hey, let’s split this $10 evenly,” creating information asymmetry to gain profit.
If you think long‑term, giving the other party 80 % of the current $100 can be a viable strategy. If in the future you can distribute $100 among 10,000 people, the absolute amount you receive will be larger, while the relative share becomes less important.
Further extrapolating, the proposer becomes a billionaire and allocates only 5 % to a poor responder who desperately needs the $5 to buy food for the day and therefore must accept. The proposer doesn’t care about the $100 at all, preferring to get nothing rather than give the responder more, and imposes the same unfair terms on 10,000 responders. The responders feel disrespected and unfairly treated, yet they have no choice but to accept.
Do such scenarios actually occur? I believe many modern societies have similar prototypes. How to avoid falling into this situation may require reading more material to find answers.