John owns one share of a new nanotech startup. He's making an offer to sell his share to Tim. John has utility function . Tim has utility function U(X)=X. Both John and Tim believe that the nanotech company will either be successful in which case it will be worth $900 per share, or fail miserably, in which case it will be worth $0 per share. They both believe the startup will be successful with probability 5%. Because they hold the same beliefs, there is no asymmetric information.

Suppose John makes a take-it-or-leave-it offer to Tim: John makes an offer and if Tim accepts, they make the trade. If Tim rejects, John keeps the stock and Tim gets nothing. In the equilibrium of this game, John offers to sell his share for $ ______________________ and Tim ______________--

Options:

accepts

rejects

0

2.25

3

15

20

25

30

35

40

45

50

400