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A corporate board for a large company is made up of five members: Jane, Tom, Sally, Emily, and Jason. Each member has a strict hierarchy:
A corporate board for a large company is made up of five members: Jane, Tom, Sally, Emily, and Jason. Each member has a strict hierarchy: Jane is senior to Tom, Tom is senior to Sally, Sally is senior to Emily, Emily is senior to Jason. The board must decide how to split a 145,000 dollar bonus among the five members of the board. The rules of board are as follows.
- The most senior member proposes a distribution among the members. After observing the proposal, the five board members vote on whether to accept the proposal or reject it. If the proposal is rejected, then the most senior member is fired and no longer participates in the process. In the case of a tie, the proposer's vote decides whether to accept or reject. If a proposal is rejected, then the next most senior member now proposes a distribution. If the proposal is accepted, then the distribution is received by the members of the board.
- Each board member cares about three main factors. (1) They do not want to be fired (2) If they are not fired, then they want to get the most dollars they possibly can. (3) Each board member would prefer to fire a board member, if all other results would otherwise be equal.
- Finally the board members do not trust each other and will not follow any promises except for the proposal. (Assume that any offer must be in whole dollars 0, 1, 2, .....)
Find the Nash equilibrium for this game.
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