Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(Question 2) [8 marks] Ann, Bob, and Carl are engage in a negotiation. The game begins with Ann making an offer (Ta: b) which Bob
(Question 2) [8 marks] Ann, Bob, and Carl are engage in a negotiation. The game begins with Ann making an offer (Ta: "b) which Bob may accept or reject. If he accepts, then Ann receives Ta, Bob receives a; and Carl receives 1 -To - r . If Bob rejects, then he makes an offer (ya, 1;) which Carl may accept or reject. If Carl accepts, then Ann receives daya, Bob receives day, and Carl receives 6(1 - yo - 1b). and the game ends. If Carl rejects, then he makes an offer (2, 2) which Ann may accept or reject. If she accepts, then Ann receives ozz,, Bob receives oz, and Carl receives oz (1 - z, - 2). If Ann rejects, then they all receive 0, and the game ends. No agent may ever be given a share that is less than zero. In particular, this means that: Cate, $ 1, ya 2 0, and 2 2 0. a) (2 marks) Draw the extensive form game. b) (2 marks) Find the subgame perfect equilibrium. You should clearly state "The subgame perfect equilibrium is ..." c) (2 marks) Find the equilibrium payoffs for Ann, Bob, and Carl. d) (2 marks) Explain the impact that da, 6, and or have on the equilibrium outcome and equilibrium payoffs
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started