AppliedMultiple choice
In the ultimatum game one player proposes how to split in whole dollars and the other accepts or rejects; a rejection leaves both with nothing. What does subgame-perfect equilibrium predict, if players care only about money?
- AA – split, because either player can walk away and equal shares are the only stable division
- BThe proposer offers and it is accepted
- CThe responder rejects anything below
- DNo equilibrium exists because the game has no mixed strategy
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Game theory: dominance, mixing and the indifference condition
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