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I know 2 explanations to such seemingly irrational behaviour in cognitive science. Both of them don't really justify the usage of the simple reward-maximizing model in economics. Rule Rationality versus Act Rationality Act Rationality is the notion that every decision an agent makes is made in order to maximize his utility. Rule Rationality is the notion ...

@OfriRaviv provided a great answer, but I thought I'd add a third alternative I am aware of for completeness. The Tversky & Shafir result is only a violation of classical probability. This approach to probability usually goes unquestioned (since people often assume classical logic is the only reasonable logic), but could be put under scientific ...

I've found Neighbors as Negatives: Relative Earnings and Well-Being by E.F.P. Luttmer (2005), although I'm not sure it's the right one. I've heard about your study as well, but I thought it was older than 2005. You can read the study I linked and look up the references. There are quite a lot that touch the same subject.

The experiment you are referring to is usually called the ultimatum game, and was first experimentally tested by Güth, Schmittberger, and Schwarze in 1982 [1]. [1] Güth, Werner, Rolf Schmittberger, and Bernd Schwarze. "An experimental analysis of ultimatum bargaining." Journal of Economic Behavior & Organization 3.4 (1982): 367-388. PDF

Bystander Effect The Bystander Effect could be your answer. The more people, the less personal responsibility. Person gets assaulted and mugged on a crowded street in broad daylight, nobody calls the cops. Software bugs slow company productivity almost to a halt, many employees, nobody reports the problem. Tragedy of the Commons The tragedy of the ...

If you're looking for a simple game, for example to teach the holdout problem to students just beginning game theory, you could do worse than start with a general prisoner's dilemma (PD) game. The 30-second explanation is that it only makes (rational) sense for one player to act if the other person is acting as well. The holdout problem is a motivation for ...