| Wilma and Betty must split $10 by playing the ultimatum game, which works as follows. First, Wilma proposes an integer between 0 and 10 (inclusive), representing the amount she will keep for herself (Betty gets the rest). Second, Betty either accepts or rejects the proposal. If she accepts it, the money will be divided as proposed. If she rejects it, neither will receive anything. Illustrate this game by drawing a tree and solve it by reasoning in reverse (there may be more than one equilibrium). Do you think people would actually play the game this way? Why or why not? |
