Question: Question : Consider the following bargaining problem: 2 0 lakh rupees needs to be split between X and Y . Y gets to make an
Question : Consider the following bargaining problem: lakh rupees needs to be split between X and Y Y gets to make an initial offer. X then gets to respond by either accepting or rejecting Ys initial offer. If X accepts, the game ends and the initial offer would be their payoff. If X rejects, then the game moves to the second period where X makes an offer. In the second period, Y has two choices either accept or reject Xs offer. If the offer is accepted, then Xs offer would be the payoff. Otherwise, both are getting Ys discount factor is and Xs discount factor is
a Represent this game in extensive form draw the game tree only points
b Find subgame perfect equilibrium SPE of this bargaining game. points
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