Two people adopt a procedure to divide 100 dollars. Person 1 offers person 2 an amount c up to 100. If person 2 accepts this offer, then person 1 receives the remaining 100−c. If person 2 rejects the offer then neither receives any payoff. These are the only two courses of action available to person 2. Each person cares only about the amount of money they receive. You can assume c can be any real number between 0 and 100. 

a. How many strategies does each player have? What are the strategies for player 2 in this game? Be very careful when describing strategies. 

b. Assuming person 2 takes the action preferred by person 1 when indifferent. What is the unique rollback solution outcome of this game? What are the players strategies under the rollback solution.

Answer rating: 100% (QA)

The optimal strategy for person 1 is to offer any amount c0 such that person 2 has a great chance of ... View the full answer