[hmkpoker]

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I will go back to reading the article, to see if there is some worthwhile insight, but I have temporailly stopped after reading this:

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IMAGINE that you are sitting next to a complete stranger who has been given £10 to share between the two of you. He must choose how much to keep for himself and how much to give to you.

He can be as selfish or as generous as he likes, with one proviso: if you refuse his offer, neither of you gets any money at all. What would it take for you to turn him down?

This is the scenario known to economists as the ultimatum game. Now the way we play it is generating remarkable insights into how the human brain drives financial decisionmaking, social interactions and even the supremely irrational behaviour of suicide bombers and gangland killers.

According to standard economic theory, you should cheerfully accept anything you are given. People are assumed to be motivated chiefly by rational self-interest, and refusing any offer, however low, is tantamount to cutting off your nose to spite your face.

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This is just stupid. This ridiculous result does not in any way depend on "standard economic theory", it depends on suckers.

This scenario becomes precisely clear when we realize that it is exactly symmertic, i.e. it does not matter which person is "given" the $10 initially; both players must agree on the split for either to be paid. The only possible rational solution is to offer and accept only $5.

Any player who accepts less than $5 has not thought about the game thoroughly (and hence is not "perfectly rational", in the game theoretic sense).

A player who accepts $0 rather than agreeing to $4 has made precisely no worse of a mistake than the player ending up with $0 after holding out for $6.

There is nothing at all in this game that confounds "standard economic theory."

This article better pick up fast.

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Calm down.

The proposed situation in the article is SINGULAR. Non-iterated. The tendency for people to turn down any quantity, assuming that this action will have no impact on the future, is irrational.

However, I agree that it's a poor analog of economics.