ing. In the first round, player 1 proposes a division z = (₁, 72, 73), with 7₁ +1₂ + 13 = 1. After observing the proposed z, first player 2 chooses whether to accept or reject it, then player 3 does. If both accept the proposal, it is implemented and each player i receives payoff I¡. If either rejects the proposal, then we move to the second round of bargaining, in which player 2 proposes a division y = (y₁, 32, 33) with y₁ + y2+y3 = 1, which player 3 first decides whether to accept or reject, followed by player 1. If both 3 and 1 accept, the proposal is implemented, and each player i receives payoff dy,, where 8 € (0,1) is a common discount factor. If either rejects the proposal, we move to the third round, in which player 3 makes a proposal z = (21, 22, 23) with 21 +22+ 23 = 1 that player 1 accepts or rejects, followed by 2
ing. In the first round, player 1 proposes a division z = (₁, 72, 73), with 7₁ +1₂ + 13 = 1. After observing the proposed z, first player 2 chooses whether to accept or reject it, then player 3 does. If both accept the proposal, it is implemented and each player i receives payoff I¡. If either rejects the proposal, then we move to the second round of bargaining, in which player 2 proposes a division y = (y₁, 32, 33) with y₁ + y2+y3 = 1, which player 3 first decides whether to accept or reject, followed by player 1. If both 3 and 1 accept, the proposal is implemented, and each player i receives payoff dy,, where 8 € (0,1) is a common discount factor. If either rejects the proposal, we move to the third round, in which player 3 makes a proposal z = (21, 22, 23) with 21 +22+ 23 = 1 that player 1 accepts or rejects, followed by 2
Chapter8: Game Theory
Section: Chapter Questions
Problem 8.7P
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