Answer to Question #194109 in Economics for Amit

Question

Question 1. Suppose Pat and Chris are bargaining over how to split $m. Pat offers Chris an amount up to $m, which the latter can accept or reject. If Chris accepts the offer, then he receives the amount offered to him while Pat receives the remainder amount, but if Chris rejects the offer, then neither receives any payoff. Both Pat and Chris only care about the amount of money they each receive.

1.Find the subgame perfect equilibrium when Chris is willing to accept the offer of 0. 2.Find the subgame perfect equilibrium when Chris rejects the offer of 0.

Answer 1

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