Construct a sequential equilibrium for the bargaining game – Microeconomics
Contemplate the following incomplete info variation on the Ru binstein mannequin. Two gamers are bargaining over splitting $10.00. They take turns making affords, with low cost issue 6 = .999999 utilized each time a suggestion is rejected. Participant 1 seeks to maximise her expeeted payoff. There’s incomplete details about participant 2. Participant 1 assesses prob potential 7f that participant 2 seeks to maximise his anticipated payoff, and he or she assesses likelihood 1 -7f that he’ll ask for $eight.00 exactly each time he is ready to supply, and he’ll resolutely flip down any supply that leaves him with lower than $eight.00.
(a) Construct a sequential equilibrium for this bargaining game for the case 7f = .2. (That is laborious, however not inconceivable.)
(b) Construct a sequential equilibrium for this bargaining game for the case 7f = .eight. (That is tougher.)
(c) Construct a sequential equilibrium for each potential worth of 7f (and, specifically, for 7f very shut to at least one). (Good luck!)
