Scenario: Alex Puts $100 on the Table

question 73

Multiple Choice

Scenario: Alex puts $100 on the table. Bob chooses either to take $51 for himself and $49 for Clare or pass. If Bob passes, then Alex adds another $2 and Clare chooses either to take $52 for herself and $50 for Bob or pass. If Clare passes, then Alex adds another $2 and Bob chooses either to take $53 for himself and $51 for Clare or pass, and so on. In other words, a player chooses either to take $2 more for himself/herself or pass, and, every time a player passes, Alex adds another $2. The game ends if $200 is on the table or either Bob or Clare chooses not to pass before that. If the amount on the table reached $200, then Bob and Clare get $99.99 each (Alex takes two pennies back) . The figure below shows the extensive form of this game. Bob's payoff is written first and Clare's second.

-Refer to the scenario above.Suppose that,if the game reached the end with $200 on the table,Bob and Clare get $100 each instead of $99.99.Then which of the following could happen in an equilibrium?

• A) Bob passes until $198 is on the table, and Clare ends the game.
• B) Bob passes every time it is his turn, and Clare does the same.
• C) Bob ends the game in his first turn.
• D) Bob ends the game when $150 is on the table.

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