AM16 Ultimatum Game

Background: Read Fiona Carmichael, Intro to Game Theory, Chapter 1 as TEXT

Other material is the ANTI-TEXT.

This lecture was done via INVERTED CLASSROOM; Students were supposed to study material (attached below) and watch associated video lecture to learn two concepts before coming to class:

DECISION TREE DIAGRAMS for representing GAMES

SOLVING Decision Tree Diagrams by Using Backwards Induction.

The Lecture Notes and Video Lecture are linked here: L6 Game Theory

Both Notes and Lecture cover ADDITIONAL MATERIAL on Strategies and Normal Form which is NOT REQUIRED background for this lecture.

On basis of this background, the lecture discussed on particular game -- the Ultimatum Game (and the Dictator Game) in detail -- assuming students knew about tree diagrams and solving games by backwards induction. We also did some experiments in class to see how the game actually works in real life. (1 hour video lecture is linked below.

Sample Question for Final:

1. Assume Ultimatum Game is played for PKR 1000, with 100 Rs notes, so that offers can only be multiples of 100 Rs. PROVE that utility maximizing strategy for offerer is to offer 100 exactly, and for responder to accept.

2. What does EMPIRICAL EVIDENCE say about the ultimatum game?

3. EXPLAIN why empirical evidence is DIFFERENT from theoretical predictions of economic utility maximization.