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A rich benefactor calls a meeting with two Deans. The benefactor wishes to make a $100 donation to the two schools, but requires the deans to engage in the following bargaining game to divide the money. First the Dean L offers the Dean R a portion of the $100, which the Dean R can Accept or Reject. According to the benefactor's rules, the offer can be one of $75, $50, or $25. If the Dean R Accepts the offer, then the Dean R gets the offer, and the Dean L gets what is left over from the $100. If the Dean R Rejects the offer, then the game ends and both deans get nothing. Describe the Subgame Perfect Equilibrium outcome: explain the Dean's optimal action contingent on each possible offer. Then explain the Dean L's optimal offer.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91240454

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