This paper challenges the traditional economic assumptions of rationality and individual greed, arguing that these concepts often fail to explain economic behavior. It introduces the concept of interdependent preferences, where individuals' choices are influenced by the actions and outcomes of others. The paper discusses the role of reciprocity, particularly intrinsic reciprocity, which refers to the tendency to respond to kindness with kindness and to unkindness with unkindness. This form of reciprocity is characterized by a utility function that depends on the consumption of others, with the rate of valuation influenced by past and anticipated actions. The paper critiques traditional models of selfish agents optimizing actions and reputational concerns, suggesting that intrinsic reciprocity can provide clearer explanations of economic phenomena. It presents a formal framework for models of interdependent preferences and intrinsic reciprocity, using the ultimatum game as a case study. The ultimatum game, where players bargain over a fixed surplus, challenges the hypothesis that income maximization and equilibrium describe economic interactions. The paper discusses various models, including income maximization, interdependent preferences, and preferences over general consumption goods, and explores how these models can account for observed behaviors. The paper concludes by discussing the implications of these models for understanding economic behavior and suggests that a more nuanced approach, incorporating intrinsic reciprocity, can lead to better explanations of economic phenomena.This paper challenges the traditional economic assumptions of rationality and individual greed, arguing that these concepts often fail to explain economic behavior. It introduces the concept of interdependent preferences, where individuals' choices are influenced by the actions and outcomes of others. The paper discusses the role of reciprocity, particularly intrinsic reciprocity, which refers to the tendency to respond to kindness with kindness and to unkindness with unkindness. This form of reciprocity is characterized by a utility function that depends on the consumption of others, with the rate of valuation influenced by past and anticipated actions. The paper critiques traditional models of selfish agents optimizing actions and reputational concerns, suggesting that intrinsic reciprocity can provide clearer explanations of economic phenomena. It presents a formal framework for models of interdependent preferences and intrinsic reciprocity, using the ultimatum game as a case study. The ultimatum game, where players bargain over a fixed surplus, challenges the hypothesis that income maximization and equilibrium describe economic interactions. The paper discusses various models, including income maximization, interdependent preferences, and preferences over general consumption goods, and explores how these models can account for observed behaviors. The paper concludes by discussing the implications of these models for understanding economic behavior and suggests that a more nuanced approach, incorporating intrinsic reciprocity, can lead to better explanations of economic phenomena.