Consider the following alternating-offer bargaining game. Player 1 must decide how to split $100 between themselves and Player 2 (let's call the amount offered to Player 2, X). Player 2 observes Player 1's offer and can either Accept or Reject the offer. If they Accept then the game ends and both players receive the amount specified in Player 1's offer. If they Reject then $5 is subtracted from the total and now Player 2 must decide how to split the remaining $95 (let's call the amount offered to Player 1, Y). Player 1 then gets to decide whether to Accept or Reject Player 2's offer. If they Accept then the game ends and both players receive the amount specified in Player 2's offer. If they Reject then $5 is subtracted from the total and now Player 1 must decide how to split the remaining $90 (let's call the amount offered to Player 2, Z). Finally, if Player 2 Accepts then the game ends and both players receive the amount specified in Player 1's offer. If they Reject then both player receive zero.

a. Draw the game tree for this sequential move game. (2 marks) b. Find the Subgame Perfect Equilibrium of this game. Be sure to specify moves for all decision nodes in the tree. (4 marks) c. If this game is played according to the equilibrium strategies, how will the game end and what will be the payoffs for both players? (2 marks) d. What can this game tell us about real world bargaining? (2 marks)