The Ultimatum Game (Continuous)

This lecture explores the ultimatum game when the proposer can make an offer from a continuum of possibilities.

Takeaway Points

  1. Offering any of the surplus to the receiver is never optimal for the proposer. This is because the proposer can always shave the offer down by a tiny fraction, still induce the receiver to accept, and keep more of the surplus for himself.
  2. The proposer can no longer shave down the offer by a tiny fraction if the offer gives none of the surplus to the receiver. (The receiver would reject such offers.)
  3. Thus, the proposer can capture the entire surplus.


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