Bargaining to split a resource

Reference no: EM13515942

Two countries, A and B, are bargaining to split a resource that is valued at $100. A makes the first offer, stating how the $100 will be divided between them. If B accepts the offer, the game is over. If B rejects it, the total available to bargain is reduced by $1 to $99. Then B gets to make an offer. The players take turns making offers this way, and each round the amount shrinks by $1. A makes offers in the odd numbered periods, and B makes offers in the remaining periods until they reach an agreement or they run out of money to divide. A’s outside option is $2.25 and B’s outside option is $3.50. Assume that if players are indifferent between an offer and their outside option, they accept the offer. Also assume that they do not discount future payoffs. Find the subgame perfect equilibria of this game using backward induction.

Reference no: EM13515942

Questions Cloud

Is the global economic system unfair : Who would you say has benefitted the most and who has benefitted the least from the international economic system that was created at Bretton Woods and after? Why do you suppose that is? Is the global economic system unfair?

Britain seemed to promise palestine to the arabs in the : The 1973 war ended with a strategic psychological tie for both Israel and Egypt, but a tactical victory for. Britain seemed to promise Palestine to the Arabs in the

Distributing wealth to supporters is called : Distributing wealth to supporters is called. Originally, the Belgian Congo was. In 1975, Portugal finally got out of

Focusing on corporate social responsibility : I need three sentences focusing on corporate social responsibility regarding this unconvential oil play in North Dakota. I am only allowed three sentences which makes it difficult. I need the three sentences to focus on corporate social responsibi..

Bargaining to split a resource : Two countries, A and B, are bargaining to split a resource that is valued at $100. A makes the first offer, stating how the $100 will be divided between them. If B accepts the offer, the game is over. If B rejects it, the total available to bargai..

Create a sense of common cause : How have the various Pacific Island nations sought to create a sense of common cause and identity in the region? What role do nations with traditionally strong connections to Europe, such as New Zealand, play in this regard?

Explain europeans impact on the development and evolution : Describe and explain Europeâns impact on the development and evolution of the Philippines. How do you think this aspect of the Philippines story shaped the culture of the country?

Culture-politics and business climate : If you had to choose between Indonesia and Malaysia, where would you rather live, and what factors would influence your selection? Be sure to include culture, politics, and business climate in your response.

What was the underlying motive for the brutality : What was the underlying motive for the brutality that infused the Khmer Rouge regime in Cambodia in the late 1970s? How has the legacy of the Khmer Rouge continued to impede the establishment of a stable regime in Cambodia?

User Account

All Pages