Seven investors, Alice, Ben, Carla, David, Elizabeth, Fred and Gloria make $ 100 Million profit in...

 

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Seven investors, Alice, Ben, Carla, David, Elizabeth, Fred and Gloria make $ 100 Million profit in the stock market. Let us say the most senior person in this group is Alice, followed by Ben, followed by Carla, followed by David and then, Elizabeth and then followed by Fred and finally, Gloria. They now wish to share the profit among themselves. This is done by the investors making proposals on how to share. Anyone making a proposal on dividing the money, can either choose to give nothing to one or more of the others or if they choose to give a non-zero share to anyone, it must be in multiples of $1 Million. The first proposal is made by the most senior investor (i.e., Alice). All the investors (including the one making the proposal) vote for or against the proposal. If Alice wins majority votes (assume an exact 50% of votes is also counted as a majority), then the profits are divided according to her proposal. If not, Alice is fired from the group, gets nothing, and is also forbidden from voting on the proposal made by others. Then, the next in the seniority hierarchy (Ben) takes over and makes a proposal. The process continues. How will you divide this to get maximum share if you were Alice? What will be maximum share Alice will get? Seven investors, Alice, Ben, Carla, David, Elizabeth, Fred and Gloria make $ 100 Million profit in the stock market. Let us say the most senior person in this group is Alice, followed by Ben, followed by Carla, followed by David and then, Elizabeth and then followed by Fred and finally, Gloria. They now wish to share the profit among themselves. This is done by the investors making proposals on how to share. Anyone making a proposal on dividing the money, can either choose to give nothing to one or more of the others or if they choose to give a non-zero share to anyone, it must be in multiples of $1 Million. The first proposal is made by the most senior investor (i.e., Alice). All the investors (including the one making the proposal) vote for or against the proposal. If Alice wins majority votes (assume an exact 50% of votes is also counted as a majority), then the profits are divided according to her proposal. If not, Alice is fired from the group, gets nothing, and is also forbidden from voting on the proposal made by others. Then, the next in the seniority hierarchy (Ben) takes over and makes a proposal. The process continues. How will you divide this to get maximum share if you were Alice? What will be maximum share Alice will get?

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If Alice wants to maximize her share of the profits she should propose a distribution that gives her ... View the full answer