The odd thing with the pirate game is that there is no single correct answer, because social standards may differ from one group to the next. It is closely related to the Ultimatum Game, which has 3 parties, two of which have a decision to make.
The first is the one giving the money. The second is told by the first the amount of the money, told the rules, and gets to make one offer to the third on how the money will be divided between them. The third (who also knows the rules) may either accept the offer, and the money is split as arranged, or reject the offer, and no money changes hands at all.
Now you would think that the third would accept any offer as being better than nothing and would get the minimum, but this is where the social (and replay) aspect comes in. Offer too little, and the other person will consider it worth the loss to deny the person setting the terms anything as well. Supposedly the other person knows this, and as such will attempt to make a fairer division. Now where this mark gets set depends on culture and individuals involved.
In the case of this pirate game, it would be foolhardy to think you could get away with taking 98%, and thus your life would be forfeit. The other pirates could logically reason that if they vote down the greedy proposal, the next pirate is more likely to be more generous, in addition to the fact that the average share is now greater.
Ask yourself, as pirate #2, you are now the eldest living pirate. The more junior pirates have declined one minimal offer, would your make another of the same, or would you try to set the compensation a little higher, lest ye befall the same fate?
(For another example of the game theory paradoxes, consider the Prisoner's dilemma, in which regardless of how your partner acts, you're better off spilling the beans, and yet you both do best overall when you both keep silent..)