The ultimatum game experiment has a long history in experimental economics. In-vivo ultimatum like strategic settings often involve uncertain rejection and payoff reversals. This paper presents the results of an ultimatum like experiment extended to reflect characteristics of a shared international river, in particular where a downstream nation has the potentially payoff reversing strategy option of a military strike. Subjects implicitly split an endowment between water consuming and security enhancing investments, where relative security investments determine the probability of the payoff reversal, with one subject being able to purchase a gamble to reverse the payoffs. Maximin, folk, and Nash solutions are compared, with results suggesting that behavior is responding to folk theorem like incentives. Dynamic analyses support this by showing no significant relationship between the gamble choice and its single period rationality.
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Paper provided by EconWPA in its series Experimental with number
0512004.
Find related papers by JEL classification: C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory C9 - Mathematical and Quantitative Methods - - Design of Experiments N4 - Economic History - - Government, War, Law, and Regulation Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
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