An Economics Professor Has Devised an Interesting Game to Test

question 82

Essay

An economics professor has devised an interesting game to test the understanding of his students.He randomly selects two students from his class and gives one of them a $50 bill.He then asks the student what percentage of the $50 she would give to her classmate.The first student can choose any percentage she wishes,while the second student can choose whether or not to accept the offer.If the second student does not accept the offer,the professor will take the bill back,but if he accepts the offer,the money will be divided in the ratio decided by the first student.
a)What is the likely outcome of this game if both students value more money to less?
b)What is the likely outcome of this game if the second student values fairness?

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Definitions:

Uplifted

Uplifted refers to regions of the Earth's crust that have been raised due to tectonic activities, such as earthquakes or mountain-building processes, altering the landscape and geology.

Glacier

A large, slow-moving mass of ice formed by the compaction and crystallization of snow, found in cold regions and high altitudes.

Tsunami

A large, long high sea wave caused by underwater earthquakes, volcanic eruptions, or landslides.

Sublimation

The process by which material moves from a solid phase directly into a vapor, as occurs when a glacier loses ice molecules directly to the air.