Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider a model that is in between the ultimatum game and the Rubinstein bargaining model. Players 1 and 2 have to divide a pie. The

Consider a model that is "in between" the ultimatum game and the Rubinstein bargaining model. Players 1 and 2 have to divide a pie. The whole pie is worthv1to player 1 andv2to player 2.

Player 1 makes a proposal first, which is a numberxin [0,1]. Player 2 can accept the offer, in which case the payoffs of players 1 and 2 arev1(1-x)andv2x, respectively. Otherwise, player 2 rejects the offer and then can make a new proposalx'to player 1. If player 1 accepts, the payoffs of players 1 and 2 ared1v1x'andd2v2(1-x'), respectively, whered1andd2are numbers in (0,1). If player 1 rejects the offerx', the players payoffs are (0,0).

Suppose the players play a subgame perfect Nash equilibrium of this game. Whatx'will player 2 offer in any subgame after player 2 rejects the first offer?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics

Authors: Austan Goolsbee, Steven Levitt, Chad Syverson

3rd Edition

1319105564, 978-1319105563

More Books

Students also viewed these Economics questions

Question

Outline Watson and Rayners classic work on fear conditioning.

Answered: 1 week ago

Question

How many moles of water are there in 1.000 L? How many molecules?

Answered: 1 week ago

Question

4. Similarity (representativeness).

Answered: 1 week ago