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Elon Muske and the Wedding Gift Elon Muske, a wealthy person, wants to give a wedding gift to Maggie and Henry. Elon places $1,000,000 in
Elon Muske and the Wedding Gift Elon Muske, a wealthy person, wants to give a wedding gift to Maggie and Henry. Elon places $1,000,000 in a large gold envelope and $650.000 in a large gray envelope, with both actions being common knowledge to Maggie and Henry. For Maggie and Henry to obtain some of Elon's money requires that they play a two-stage, two-player (Maggie and Henry) sequential game. Maggie and Henry know that the game has the following rules: Stage 1: Henry [H] offers Maggie [ M] a portion of the $1,000,000 in the gold envelope. Maggie then either accepts [A] Henry's offer, in which case the game ends with Henry receiving the remainder of the $1,000,000 and Elon keeping the gray envelope and its $650.000: or Maggie rejects [R] Henry's offer, in which case the game moves to Stage 2. Stage 2: Elon keeps the gold envelope and its $1.000,000 leaving only the gray envelope containing $650,000. Maggie offers Henry a portion of the $650,000 in the gray envelope. Henry either accepts [A] Maggie's offer, in which case Maggie receives the remainder of the $650,000 or he rejects [R] her offer, in which case Maggie and Henry each receive 50 and the game ends with Elon keeping the $650.000 dollars in the gray envelope. Maggie and Henry care only about their own payoff and for each of them something is better than nothing. In the space directly below, draw the north-south game tree for this two-stage game. In drawing your tree, use the notations H. M. A. R and denote the fraction of $1,000,000 offered by Henry as a, where 0 s a s I and the fraction of $650.000 offered by Maggie as P. where 0 S B S 1. Using a PEN your game tree should be a neatly drawn and easy to read, no scratching out! Using a pen answer the following two questions. The answers provided for both questions should sum to less than 25 words. (1) What amount will Henry offer Maggie at the first stage? Explain how you arrived at your answer. (2) Is there a first-mover advantage? Yes. or no? Explain how you arrived at your
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