Partners Cantor and Dickens Have Capital Balances in a Partnership

question 70

Multiple Choice

Partners Cantor and Dickens have capital balances in a partnership of $160000 and $240000 respectively. They agree to share profits and losses as follows: $\begin{array}{lrr}& \underline{\text {Cantor}}& \underline{\text {Dickens}}\\\text { As salaries } & \$ 40,000 & \$ 48,000 \\\text { As interest on capital at the beginning of the year } & 10 \% & 10 \% \\\text { Remaining profits or losses } & 50 \% & 50 \%\end{array}$

If net loss for the year was $8000 what will be the distribution to Dickens?

• A) $48000 income
• B) $4000 income
• C) $4000 loss
• D) $8000 loss

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Definitions:

Best Response

In game theory, it is the strategy that yields the highest payoff for a player, given the strategies chosen by other players.

Nash Equilibrium

A concept in game theory where each player's strategy is optimal, given the strategies of all other players, resulting in no incentive for unilateral shifts.

Game of Chicken

A game theory model where two players head towards each other on a collision path; the one who swerves is considered 'chicken,' but if neither swerves, both face disastrous outcomes.

Simultaneous Game

A scenario in game theory where all players make their decisions at the same time without knowledge of the other players' choices.