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Question 4. (7 marks)
The homo economicus view of man’s behaviour as applied to the bulk offinance theory portrays decision makers and being both self-interestedand rational. Neoclassical economics makes some fundamental assumptionsabout people:
1. People have rational preferences across possible outcomes or states of nature.
2. People maximize utility and firms maximize profits.
3. People make independent decisions based on all relevant information.
In light of the following hypothetical experiments, discuss the above

Experiment 1:

Ten people are in Room X (givers) with a further ten people in Room Y(takers). Each giver in Room X will be paired with a taker in Room Yalthough they will not know the identity of the other. Givers have beengiven $20 and can transfer any part of their $20 to a taker in Room Y.Takers can either choose to keep the amount sent, in which case theamount proposed is final or else reject the amount sent, in which caseboth individuals receive nothing. That is, you can send any dollaramount from $0 to $20 and the taker can accept this offer, or reject it,in which case you both receive nothing. For example, If the takeraccepts and you send $10, you keep $20 – $10.
You are a giver. How much do you give?