1.Explain the one-shot deviation principle. Consider the following infinite horizon game:

In periods 1, 2, . . ., player 1 proposes a split of a dollar (or util) to player 2.

After player 1 makes a proposal, player 2 can either accept or reject the offer. If player 2 accepts, the game ends. If player 2 rejects, the game continues to the next period, with the dollar shrinking by a factor of .

Using the one-shot deviation principle, show that player 1 to obtains the full dollar and player 2 to obtains nothing. It is enough to show this equilibrium exists; you do not need to show uniqueness, although it does indeed hold.