Two pirates, Red Beard and Yellow Beard, have just seized one hundred gold coins, and now it’s time to share the loot. The bargaining rules are: Red Beard gets to propose a division of the one hundred coins. If Yellow Beard accepts the proposal, then the coins are allocated and the game ends. If Yellow Beard does not accept, coins get thrown overboard, and each pirate gets a payoff of zero. How many coins will Red Beard get in the (subgame perfect) outcome of this bargaining game?
A.100 coins
B.2 coins
C.200 coins
D.75 coins
E.50 coins
A. 100 coins
Because Red beard will offer (100,0) which can lead to two outcomes for Yellow beard i.e. (0,0) if he rejects and (100,0) if he accepts. He is indifferent between the two outcomes. So red beard would not give any other choice to yellow beard
Two pirates, Red Beard and Yellow Beard, have just seized one hundred gold coins, and now...
Two pirates, Red Beard and Yellow Beard, have just seized one hundred gold coins, and now it’s time to share the loot. The bargaining rules are: Red Beard gets to propose a division of the one hundred coins. If Yellow Beard accepts the proposal, then the coins are allocated and the game ends. If Yellow Beard does not accept, coins get thrown overboard, and each pirate gets a payoff of zero. How many coins will Red Beard get in the...
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...