The Ultimatum Game: Optimal Strategies Without Fairness
Games and Economic Behavior, Vol. 26, No. 2, pp. 221-252, 1999
Posted: 5 Feb 2020
Date Written: 1999
The ultimatum game is simple and this facilitates its use in the study of predictions of game theory. Experimental evidence suggests that it does not predict individual behavior well, unless individuals gain welfare from fairness in transactions, or have expectations about some wider game. Our model excludes any notion of fairness by including (potential) rivalry in transactions. In this game the proposer's expectations yield outcomes that are consistent with experimental evidence. Offers can be large or small, with none in an intermediate range. The consequent distribution appears in dictator game experiments. Our model explains how it is generated by expectations.
Keywords: Ultimatum game, Prediction, Game Theory, Fairness, Rivalry, Expectations
JEL Classification: C72, C78, D82, D84
Suggested Citation: Suggested Citation