My favorite economic game is the Ultimatum Game. This is an economic game in which two players interact to split a sum of money. The first player proposes an offer that the second player either has to accept or reject. If the second player accepts the first player’s offer, then they split the money according to the offer. However, if the second player rejects the offer, then neither of the players wins any money.
This is my favorite economic game because studies have shown that people do actually reject offers. In my opinion, rejecting an offer makes no sense at all, even if the offer is too small or imbalanced. I could understand someone rejecting an unfair offer to save his or her pride, but in a game where
one’s opponent is a computer, I just do not understand why someone would ever
reject an offer.
Above is a short video clip explaining the Ultimatum Game in terms of two children dividing a dozen cookies.