Have you heard about the ‘ultimate game of economics’? Here’s how it goes.
A person – let’s call him proposer – is given a hundred bucks and asked to split the money with a stranger, called responder. The split doesn’t need to be equal. Proposer could split it 50-50 or he could even keep 90 for himself and offer 10 to the stranger. But the condition is that if the responder rejects the offer, none of them get any money.
If you were the responder, at what split ratio would you accept the offer?
50-50? Most people would consider that fair. But is it rational?
What if you didn’t know about the total sum involved in the deal and you’re told only about the amount that proposer offers you? Isn’t it like a free money, something that you found lying on the street. Why would you reject even 5 bucks that way?
But that’s not how humans think. Right?
The knowledge that someone else got a better deal (at our cost) makes us humans feel cheated.
“Not fair,” we cry. “How dare the proposer offer less than 50 to me?” [Read more…]