The second mechanism they are considering is as follows. First, Anna proposes a split. Then, Bob decides whether to accept or reject Anna's proposal. If Bob accepts, then they split the cake according to Anna's proposal. Otherwise, they throw away the entire cake.

(a) Use backward induction to predict the outcome of this mechanism.

(b) Is the outcome of this mechanism always Pareto efficient?

(c) Do you think this mechanism is fair?