Ultimatum Game, explained.
In the Ultimatum Game, one player proposes how to divide a pot and the other can accept or reject. Rejection leaves both with nothing under the standard rules.
Why it happens
A positive offer may be financially better than zero yet still be rejected. Fairness, expectations, and the cost of tolerating an unequal split can enter preferences. An offer's arithmetic payoff is not a full model of every person's decision.
Ultimatum experiments separate the proposer's choice from a responder's power to reject. Assumptions about acceptance determine which offers succeed.
Read the result
Vary the offer and rejection threshold. Compare the proposer's possible gain with the chance of losing the entire pot. The programmed threshold is an assumption rather than a prediction of an individual responder.
A worked example
Splitting a ten-unit pot
A proposer offers the responder one unit and keeps nine.
Acceptance gives the responder one; rejection gives both zero. Whether the offer is accepted depends on more than the money totals if fairness matters.
A proposer considering rejection risk may choose a larger offer even when a smaller accepted offer would pay more.
OPTIONAL DEEPER DETAILGo deeper: inside the model
Inside this model
The responder accepts when offered at least its threshold. Acceptance pays the proposer 100−offer and the responder offer; rejection pays both zero. The threshold is a user-defined deterministic policy, not a prediction about fairness preferences.
Where this idea is useful
A practical use
A seller's theoretically profitable proposal can fail if the buyer views its terms as unacceptable.
A common misconception
“Rejecting any positive offer proves irrationality.”
That conclusion assumes monetary payoff is the responder's only objective. Preferences can also include fairness or willingness to punish an unequal proposal.
What this explanation leaves out
- Real thresholds are unknown, context-dependent and variable. The model does not claim a universal fair split or reproduce measured human behavior.
How is this different from the Dictator Game?
In the Dictator Game, the recipient cannot reject the proposed allocation. The Ultimatum Game adds that veto, which changes the proposer's incentives.
Does a proposal account for what the responder values and what they can refuse?
Further reading
Explore the original research or the teaching reference behind this experiment.