Game Theory - Game Theory (Continued) Testing for Rational...

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Game Theory (Continued)
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Testing for Rational Choice: The Ultimatum Game A Michael accepts Michael refuses $X for Tom $(100 – X) for Michael $0 for Tom $0 for Michael Tom proposes $X for himself, $(100 – X) for Michael B Possible Moves and Payoffs
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Tom’s Best Strategy in an Ultimatum Bargaining Game A Michael accepts Michael refuses $99 for Tom $1 for Michael $0 for Tom $0 for Michael Tom proposes $99 for himself, $1 for Michael B Tom can give Michael a take-it-or-leave-it offer Tom will propose $1 Michael will accept
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What would be your first offer in the ultimatum bargaining game? Would you refuse a lopsided offer? Firms are also confronted with this model when asked to sponsor or make donations – they are confronted with building a reputation .
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The Remote Office Game A Owner does not open remote office Manager manages honestly; owner gets $1,000, manager gets $1,000 Managerial candidate promises to manage honestly B Owner opens remote office C Manager manages dishonestly;
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Game Theory - Game Theory (Continued) Testing for Rational...

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