Provide a concise economic interpretation of the contrast

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This question asks you to compare two games, one of which has a joint decision.

(a) Find the pure-strategy negotiation equilibria of the extensive-form game shown in the illustration that follows. Note that y is restricted to be in the interval [0, 4] and Is there an equilibrium in which y = 4?

442_Figure 1.jpg

(b) Next consider the slightly different extensive-form game in the illustration that follows. Demonstrate that there exists a pure-strategy subgame perfect equilibrium in which y = 4.

(c) Provide a concise economic interpretation of the contrast between these two games.

Reference no: EM131251484

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