Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

two players a and b 3. (lpts) {Bargaining} Two players A and B bargain to split a pot of money. They can bargain up to

two players a and b

image text in transcribed
3. (lpts) {Bargaining} Two players A and B bargain to split a pot of money. They can bargain up to three rounds. You do not need to explicitly consider discounting. In Round 1, the total amount of money to be split is 310. Player A makes offer [chin] to player B. If B accepts A's offer, bargaining ends and they split the money according to the offer. If B rejects A's offer then they bargain in Round 2. in 1113ch 2, the pot of money shrinks to 58. Player B makes offer (12,623! to player A. If A accepts B's o'er, bargaining ends and they split the money according to the offer. If A rejects B's offer then they bargain in Round 3. In Round 3, the pot of money shrinks to $5. Player A makes oer (:13, E3} to player B. If B accepts A's o'er, bargaining ends and they split the money according to the offer. If B rejects A's o'er then game also ends and both players's payoffs will be zero. (3} (Spts) For this part only: assume that each player always chooses to accept an oiler when the player is indierent between Accept and Reject. Find the subgame perfect equilibrium. Specically, for each round starting from the last round describe the optimal strategy to accept and reject otters and the optimal offer to make. In the equilibrium, when is an offer accepted and how much payo' will each player receive? (b) (Spts) The game is the same except for two changes: (1} Each player always chooses to reject an offer when the player is indi'erent between Accept and Reject; (ii) Offers must be nonnegative integers. Find the subgame perfect equilibrium. Specically, for each round starting from the last round describe the optimal strategy to accept and reject offers and the optimal oer to make. In the equilibrium, when is an offer accepted and how much payoff will each player receive?I

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Exploring Economics

Authors: Robert L Sexton

5th Edition

978-1439040249, 1439040249

More Books

Students also viewed these Economics questions

Question

please dont use chat gpt AI 5 8 0 . isomerization

Answered: 1 week ago