A classic experiment in behavioral economics that challenges traditional assumptions about rationality. The proposer offers a split of money, and the responder can accept or reject. If rejected, both get nothing.
The Setup: Player 1 (Proposer) is given $100 and must propose a split with Player 2 (Responder). Player 2 can accept or reject the offer.
Rational Prediction: Game theory predicts the proposer should offer $1 and keep $99, and the responder should accept (since $1 > $0).
Actual Results: In experiments, offers below 30% are often rejected! People prefer fairness over money, demonstrating "altruistic punishment."
Key Findings:
• Modal offer: 50/50 (fairness norm)
• Offers below 20% rejected ~50% of the time
• Culture affects results (more collectivist = more fair offers)
• Shows humans value fairness, reciprocity, and punishing unfairness