Players A and B have a dollar to divide between them. They agree to spend at most three days negotiating over the division. The first day. Player A will make an offer. Player B either accepts or comes back with a counteroffer the next day, and on the third day, Player A gets to make one final offer. If they cannot reach an agreement in three days. both players get zero. (2.5-3+3+4)
(a) What is called sub-game perfect Nash equilibrium? Explain briefly.
(b) What is the sub-game perfect Nash equilibrium if there is no discounting?
(c) What is the sub-game perfect Nash equilibrium if both players have the same discount rate?
(d)What is the sub-game perfect Nash equilibrium if each player has a different discount rate?