The Ultimatum Game Under Baumol's Fairness Assumption
Scenario: John and Leann are about to play the ultimatum game. When John is the proposer, the percentage of the endowment that he is willing to offer to Leann changes based on the size of the overall endowment. When he considers the game from Leann's point of view (the respondent) the offers (as a percentage of the endowment) that he would accept also vary with the size of the overall endowment. The intersections between his preferences as a proposer and a respondent make up his fairness boundary for the Ultimatum Game. Leann's fairness boundary for the game is constructed in exactly the same way. By positioning their individual fairness boundaries in an Edgeworth Box, it is immediately clear that there are offers that Leann and John would both view as being superfair.
