1. Two players are bargaining, just as in the Rubinstein's alternating offers model studied in class,...
2. Two players are bargaining, just as in the Rubinstein's alternating offers model studied in class, over the division of a cake of size 1. There are two differences from the standard model: first, there is no discounting. Second, while an acceptance guarantees implementation of the going proposal, following every rejection there is an exogenous probability p > 0 that the game will completely break down. If that happens, each player gets gets 0 <b < 1/2. If not, the...
Consider the following bargaining game in which two players are trying to share a cake of size 1. Player 1 offers ri e [o, 1jand player 2 either accepts (Y) of rejects (N): If player 2 accepts player 1 receives a payoff of ri and player 2 receives 1-1. If player 2 rejects, then player 2 moves again to offer 72 [0, 1] to which player 1 responds by either accepting (Y) or rejecting (N): If player 1 accepts player...
Question 4. Alternating Offers with Discounting You are buying a house and are bargaining with the current owner over the sale price. The house is valued at $220,000 by you and $120,000 by the owner. Assume that bargaining takes place with alternating offers and that each stage of bargaining (after an offer and response) takes onde full day to complete. If agreement is not reached after 10 days of bargaining, the opportunity for the sale disappears completely (you get no...
Question 4. Alternating Offers with Discounting You are buying a house and are bargaining with the current owner over the sale price. The house is valued at $220,000 by you and $120,000 by the owner. Assume that bargaining takes place with alternating offers and that each stage of bargaining (after an offer and response) takes onde full day to complete. If agreement is not reached after 10 days of bargaining, the opportunity for the sale disappears completely (you get no...
Consider the infinitely repeated version of the symmetric two-player stage game in figure PR 13.2. The first number in a cell is player 1's single-period payoff. Assume that past actions are common knowledge. Each player's payoff is the present value of the stream of single-period payoffs where the discount factor is d. (a) Derive the conditions whereby the following strategy profile is a subgame perfect Nash Equilibrium: 2 Consider the infinitely repeated version of the symmetric two-player stage game in...