Next, let’s look at a game from the perspective of the Proposer. To simplify the decision-making process, assume that the Proposer is choosing between offering the Responder either $50 or $20 from a $100 pot

(so the Proposer would keep $50 and $80, respectively).

If the Proposer offers $50, the Responder will accept with probability 95 percent; if the Proposer offers $20, the Responder will accept with probability 75 percent.

Since the Proposer also values “fairness,” they will receive an additional $15 of value when they offer at least 50 percent of the pie.

a. What are the Proposer’s expected values for offering

$50 or $20? Which amount will the Proposer offer?

b. Let’s say that the Proposer does not care much about

“fairness” and only values splitting the pot evenly at

$5. Now, what are the Proposer’s expected values for offering $50 or $20? Which amount will the Proposer offer?