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Two friends (J ohar and Zichen) are trying to split $1, 000. In the rst round of bargaining, Zichen makes an offer at cost 2

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Two friends (J ohar and Zichen) are trying to split $1, 000. In the rst round of bargaining, Zichen makes an offer at cost 2 (to herself), proposing to keep xz and give the remaining to Johar, 33,; = 1, 000 :nz. Johar either accepts her offer (ending the game) or rejects it. In round 2, Johar makes an offer of (yz,yJ), at a cost of 5 to himself, which Zichen accepts or rejects. If Zichen accepts the offer, the game ends; but if she rejects it, the game proceeds to the third round, in which Zichen makes an offer (22, ZJ), at a cost z to herself. If Johar accepts her offer in the third round, the game ends and payoffs are accrued to each player; Whereas if he rejects it, the money is lost. Assume that players are risk-neutral (utility is equal to money obtained minus any costs), the discount factor is denoted by 6 and z = 0. (a) Graphically represent this bargaining game. (b) What is the subgameperfect equilibrium outcome

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