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Three players, P1, P2, and P3, bargain for shares of a pie. A three sided die is cast. If the die comes up number "j" then Pj gets to propose a split of the pie among the three players. Once a proposal is made, the other players

Three players, P1, P2, and P3, bargain for shares of a pie. A three sided die is cast. If the die comes up number "j" then Pj gets to propose a split of the pie among the three players. Once a proposal is made, the other players

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Three players, P1, P2, and P3, bargain for shares of a pie. A three sided die is cast. If the die comes up number "j" then Pj gets to propose a split of the pie among the three players. Once a proposal is made, the other players simultaneously accept or reject the proposal. If either responder rejects then the game is over. If both players accept then the proposal is implemented and the game ends. For example, if shares of the pie 1/2 to P1, 1/4 to P2, 1/4 to P3 are offered and this is accepted by the two responders then P1 gets a payoff of 1/2, P2 gets 1/4 and P3 gets 1/4. An offered share to a player can be any number between o and 1. There is an SPE of this game where one responder gets o and the other responder gets the whole pie, and the proposer gets o. 1) True 2) False There is an SPE of this game where one responder gets 0 and the other responder gets the whole pie, and the proposer gets 0. True or False?
Transcribed Image Text:Three players, P1, P2, and P3, bargain for shares of a pie. A three sided die is cast. If the die comes up number "j" then Pj gets to propose a split of the pie among the three players. Once a proposal is made, the other players simultaneously accept or reject the proposal. If either responder rejects then the game is over. If both players accept then the proposal is implemented and the game ends. For example, if shares of the pie 1/2 to P1, 1/4 to P2, 1/4 to P3 are offered and this is accepted by the two responders then P1 gets a payoff of 1/2, P2 gets 1/4 and P3 gets 1/4. An offered share to a player can be any number between o and 1. There is an SPE of this game where one responder gets o and the other responder gets the whole pie, and the proposer gets o. 1) True 2) False There is an SPE of this game where one responder gets 0 and the other responder gets the whole pie, and the proposer gets 0. True or False?
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