Mathematician who won 1994 Nobel Prize in Economics for his work in game theory. (See feature film, “A Beautiful Mind.”)

Explanation of interactions in which the results of one person’s choices depend not only on his own behavior but also on the choices of another person.

Building on game theory, this sub-discipline of economics uses simple experiments to test the predictions of economic theory.

The assumption that individuals seek to maximize their own material gains and expect others to do the same.

This is a simple, one-time only, double-blind, strategic interaction between 2 people. The “proposer” divides a fixed amount of money into 2 parts, keeping one part and offering – “take-it-or-leave-it” – the other part to an unknown “responder.” The responder must choose whether to accept or reject the ultimatum from the unknown proposer. If the responder accepts, the money is divided as proposed. If the responder rejects, both players receive $0.