Question

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

E) 75 Coins

D) 50 Coins

Answer 1

Answer: (E) 75 coins

Yellow beard will accept anything more than zero as he has no other choice. So, from the given options, 75 is the highest and obviously Red beard will ask for the highest share for himself.

100 coins is incorrect since in this case Yellow beard will decline the proposal because he will get zero coins in either case.

2 coins is incorrect since Red beard will not minimize his share.

200 coins is illogical since there are a total of 100 coins only.

From 75 and 50, Red beard will choose the higher one, i.e. 75.

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