Scenario: Pat and Joe Are Playing a Game

question 16

Multiple Choice

Scenario: Pat and Joe are playing a game. The rules of the game are simple. Pat is given $100. He can either give it to Joe or keep it for himself. If he keeps it for himself, $50 will be taken back, and the remaining will be split between them. If he gives it to Joe, Joe can either divide it into two equal parts or keep it for himself. If he divides it into two equal parts, each of them will get $50. If he does not split the money, he will get the entire amount.
-Refer to the scenario above.Which of the following is likely to be true in equilibrium if Joe is known to be trustworthy?

• A) Pat and Joe will each receive $25.
• B) Pat and Joe will each receive $50.
• C) Pat and Joe will each receive $0.
• D) Pat will receive $0, and Joe will receive $100.