You are player 2 in the Ultimatum Game. Player 1 has offered you $10. Does it make a difference to you if player 1 is dividing $12, $20, or $100? Why? Does it make a difference to you if player 1 is offering his own money, dividing money that he won in a previous game, or dividing money given to him for division? Why? Does it make a difference if player 1 is an individual, an organization, or a computer?
The Ultimatum game involves the making of a take-it-or-leave-it offer made by the first player (player 1) which the player on the other side (player 2) may accept or reject. This offer is known as the ultimatum or fait accompli offer. If player 2 accepts players one division the both players receive money according to the division. If player 2 rejects the division then both players get nothing. I would accept the offer of $10 by player 1 if he were to divide $12 or $20. Both are generous offers which would be appreciated by many people. I would, however, not accept the $10 if player one made the division out of $100 because its a very selfish offer. The amount is very far from an equal or close to equal-split. The division would not have been made out of fair considerations and I would rather that we both get nothing than let player 2 benefit from the 90% of the remaining money.
I would, however, accept the $10 offer made out the $100 if the whole amount was players 1 money. I had not put in any effort to the gain of the money so I should appreciate the little am given. The amount player 1 gives me should be reasonable and which I can be able to do something worthwhile with it. I would, therefore, not accept anything below $4. He should give an amount that shows that he respects me and also respects my honor. If he was given that money to divide then he should do so equally or fairly.
The likelihood of accepting a small offer from an individual will be more than that of receiving the small offer from an organization. Organizations often have larger profits and gains than many individuals. My chances of taking the $10 from the $100 from an individual will thus be higher, than my chances of taking it from an organization. I would also not take any amount which results from a computer division generation just because the computer has yielded it. The amount needs to be fair to me, and which reflects my honor.
Discuss any tragedy of the commons example not already discussed in the lectures or texts, analyzing the elements involved using game theory.
A commons is a shared resource. Shared, in this context means that each individual doesnt have a claim to any part of the resource, but rather, to the use of a part of it for their benefit. The tragedy comes as result of the lack of regulation. The lack of regulation results in the overexploitation of the commons by each personto their advantage. The air, for instance, is a commons. No person or group of persons can claim ownership of the air. When both developed and developing countries pollute the air and the effects of global warming become apparent and have devastating consequences for some countries, they have the right to complain and stop other countries from further pollution. The consequences are in the form of floods, drought and lack of wateret al.
In the tragedy of the commons persons can communicate while in the game theory, the players cant. Players in both scenarios, however, need to act fairly and reasonably for there to be a better outcome for all of them. In the commons of the air example, all countries need to be fair to countries likely to experience more devastating consequences because of their geographic locations, especially low-lying countries like some islands. Other considerations include lack of financial capacity or technology to mitigate or adapt to the effects of global warming. Otherwise, the effects of global warming will not only adversely affect such countries but also those developed and developing countries that greatly pollute the air.
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