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18. Consider a bargaining (negotiation) game of 2 periods. In the first one, Player A offers Player B to share 1 million Euros (x,1x), where

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18. Consider a bargaining (negotiation) game of 2 periods. In the first one, Player A offers Player B to share 1 million Euros (x,1x), where x is the quantity that A would receive. Player B can then choose to accept or reject A 's proposition. If he accepts, the game is over. If he rejects, they move on to period 2 where both have to make simultaneously an offer of share. If A proposes (x,1x) and B proposes (1y,y), payoffs are (x,y) if x+y1 and (0,0) otherwise. Payoffs are discounted with the discount factor =1/4. a) Solve the subgame that starts when B rejects the offer. Find best reply functions of A and B, and find the Nash equilibria of the subgame. Find the expected payoff of the equilibrium in this subgame. b) Find all the subgame perfect Nash equilibria. Note: If B is indifferent between accepting and rejecting, we assume that he always accepts. 18. Consider a bargaining (negotiation) game of 2 periods. In the first one, Player A offers Player B to share 1 million Euros (x,1x), where x is the quantity that A would receive. Player B can then choose to accept or reject A 's proposition. If he accepts, the game is over. If he rejects, they move on to period 2 where both have to make simultaneously an offer of share. If A proposes (x,1x) and B proposes (1y,y), payoffs are (x,y) if x+y1 and (0,0) otherwise. Payoffs are discounted with the discount factor =1/4. a) Solve the subgame that starts when B rejects the offer. Find best reply functions of A and B, and find the Nash equilibria of the subgame. Find the expected payoff of the equilibrium in this subgame. b) Find all the subgame perfect Nash equilibria. Note: If B is indifferent between accepting and rejecting, we assume that he always accepts

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