Digital SAT Reading and Writing Practice Question #404

A famous paradox in behavioral economics centers on the "Traveler's Dilemma." In this scenario, two travelers whose identical luggage was lost are asked by an airline manager to independently write down a value between $2 and $100. If they write the same number, they receive that amount. If they write different numbers, the lower number is paid to both; however, the person who wrote the lower number receives a $2 bonus, while the person who wrote the higher number receives a $2 penalty. Strict game theory (Nash equilibrium) dictates that perfectly rational players will continuously undercut each other until both write $2. Yet, across decades of experimental data, human participants consistently write down numbers close to $100, ultimately walking away with significantly higher monetary payoffs than the mathematical model predicts. This recurring discrepancy strongly suggests that _______