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Irrationality and Emotions - 'The Ultimatum' game

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Retaliator
@retaliatorr
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2 min read

The Game

Setup

You enter a BTC lottery. After a few days, you discover you lost BUT you were chosen as Player 2.

Intrigued by what this means, you go back to the lottery website and see a message, explaining the following rules:

The Ultimatum

  • The 'Winner' (Player 1) has to propose a way to split the BTC with Player 2.

  • If Player 2 accepts the deal, they both walk away with their part of the prize

  • If Player 2 rejects it, they both get nothing

Players can't communicate, don't know each other, and probably will never talk ever again.

The problem

If you were Player 2, what would be the minimum amount of money you'd accept? 50%? 25%? 1%?

Take a second to think about it, and then read on!

. . .

Thinking about the outcomes

From P2's perspective, you either get some money or you get none.

Therefore, to maximize the amount of money earned, you should take even 0.1% of the prize, or anything above 0 BTC, really.

But that feels wrong! A 50/50 is so much more fair!

Well, emotions are hardwired into our brains. They help us deal with complex social situations and solve many problems, but sometimes they might negatively impact our decisions, namely when it comes to mixing people and money

Making the best decision

Sometimes, emotion is good! Sometimes it's not.

When it comes to what we want to do in our future, who we like to work with, and differentiating right from wrong, emotion is an essential tool that allows us to follow the right path.

But, if dealing with more objective things, like money, probabilities, and investing, being cold and rationale is usually the best bet!

Conclusion

Humans are sometimes irrational, it's part of what makes us, well, Human! That said, in our daily lives, we have to recognize that that irrationality can be a bad thing for us and the ones close to us!

Bonus question

Now, not knowing if the other person was rational or not, how much would you offer as Player 1?? Leave it in the comments!

Thanks for reading! Remember to Upvote and Share, so that I can keep making many posts per week!

Take a look at my last post, precisely about Rationality!

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