What is the ultimatum game? It is a game theory model which proves that rationality can lead to unfairness and people end up getting hurt.

Rationality is overrated. This is the most important lesson game theory taught me and, sadly, most game theory articles miss this point entirely.

I wish I had William Spaniel video editing skills, so I could teach this to everyone through You Tube.

My first reason for accepting the “unfair” offer in the high stakes game would also be a reason to make a fair offer in that game.

There is also the fact that we are dealing with people who aren’t always rational, and whose motives aren’t necessarily only material in nature (so even if they are completely rational, they won’t necessarily try to maximize their material gains).

For those debating rationality, which is more rational: accumulating all the material wealth possible and then fretting over it’s possible loss, or forgoing all unnecessary material wealth and living a peacefull contented life? I think all game theory problems I’ve seen assume all rational beings would pick the first.

P.S. Sorry William Spaniel, I somehow missed that you also understand that rejecting offers has utility and can be rational.

The results show that raising the stakes does increase the acceptance of offers, but at the same time, diminishes the amount of unfair offers.
At high stakes, fairness starts coming from the proposers.

Although the theory says at high stakes the acceptance of unfair offers should be higher, the proposers are not willing to risk losing everything to find out if it is really true.

The hardcore fairness from a few stubborn responders is powerful enough to trigger fairness from the greedy proposers. Nice huh?

Important note, the experiment was conducted in the “one-shot” way.

http://www.youtube.com/watch?v=6E5eRAlOCvc