Consider the ultimatum game
where anâ"allocator"isâgiven,say,
â$100.00 to decide how to divide with aâ"recipient,"who then decides whether to accept or reject theâallocation,ultimately determining whether the pair receives the allocation or not
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In the ultimatum game, the allocator must decide how to split the given $100.00 between themselves and the recipient. The recipient then has the option to accept or reject this offer. If the offer is accepted, both the allocator and recipient will get the agreed upon amount. However, if the recipient rejects the offer, neither party will get any money. This encourages the allocator to offer a fairer split in order to ensure the recipient will accept the offer.