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ultimatum game

An economic and psychological game that is played by two people. The premise is that both players are given a total sum of money to share. Player 1 is then asked to decide how the money should be split, and once they have decided, player 2 has to make the choice of whether to agree to this proposed split. If player 2 agrees then both players receive the amount decided by player 1, if they disagree then neither player receives any money.

Experimental results show that player 2 will generally agree to the split unless their share falls below 20%, in which case they will reject the offer. These results are interesting as it shows that a person will be willing to reject free money simply because they believe that the other person will be receiving an amount that is unfair, even though it would still be in both player's best interest to receive any money for free, regardless of how small.

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  • Part of Speech: noun
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  • Industry/Domain: Economy
  • Category: Economics
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