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Q1: Ultimatum Game with Types (1 point) Consider an ultimatum game (again). P; offers a share = [0, 1] of a dollar to P, so
Q1: Ultimatum Game with Types (1 point) Consider an ultimatum game (again). P; offers a share = [0, 1] of a dollar to P, so P; can either accept, in which case the dollar is divided as proposed, or reject, in which case both players get $0. Assume P; is a standard self-interested rational player, but he is uncertain about P and fears he might be playing an envious or spiteful type. Suppose specifically that he believes P; is a standard rational player with probability m = 1 p but an envious type with \"envy' parameter a > 0 with probability p. That is, if P;'s share 1 x is larger than Py 's share x, then P, incurs an envy cost a(l 2:1:) if he accepts. Find the equilibrium of this game as a function of a. What happens if rises? Explain
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