GMAT Reading Comprehension

Home > GMAT Test > GMAT Reading Comprehension Questions

Next steps

Source: GWD

Level: 3

For many years, theoretical economists characterized humans as rational beings relentlessly benton maximizing purely selfish reward. Results of an experimental economics study appear to contradict this view, however. In the "Ultimatum Game," two subjects, who cannot exchange information, are placed in separate rooms. One is randomly chosen to propose how a sum of money, known to both, should be shared between them; only one offer, which must be accepted or rejected without negotiation, is allowed.

If, in fact, people are selfish and rational, then the proposer should offer the smallest possible share, while the responder should accept any offer, no matter how small: after all, even one dollar is better than nothing. In numerous trials, however, two-thirds of the offers made were between 40 and 50 percent; only 4 percent were less than 20 percent. Among responders, more than half who were offered less than 20 percent rejected the offer. Behavior in the game did not appreciably depend on the players' sex, age, or education. Nor did the amount of money involved play a significant role: for instance, in trials of the game that were conducted in Indonesia, the sum to be shared was as much as three times the subjects' average monthly income, and still responders refused offers that they deemed too small.

Question List: 1 2 3 4

The author refers to the sum of one dollar (line 21) in order to

  • A question the notion that the amount of money involved significantly affected players' behavior
  • B provide an example of one of the rare offers made by proposers that was less than 20 percent
  • C illustrate the rationality of accepting even a very small offer
  • D suggest a reason that responders rejected offers that were less than 20 percent
  • E challenge the conclusion that a selfish and rational proposer should offer a responder the smallest possible share

Show Answer

Previous       Next