Tracy and Amy Are Playing a Game in Which Tracy

question 120

Multiple Choice

Tracy and Amy are playing a game in which Tracy has the first move at X in the decision tree shown below. Once Tracy has chosen either the top or bottom branch at X, Amy, who can see what Tracy has chosen, must choose the top or bottom branch at Y or Z. Both players know the payoffs at the end of each branch. In the equilibrium of this game:

• A)Tracy and Amy both get 125.
• B)Tracy gets 75 and Amy gets 150.
• C)Tracy gets 300 and Amy gets 200.
• D)Tracy gets 25 and Amy gets 225.

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Definitions:

Lenders

Individuals, institutions, or entities that offer funds to others with the expectation that the funds will be repaid with interest.

Borrowers

Individuals or entities that receive funds from another party under the agreement that the funds will be repaid, typically with interest, over a defined period.

Fixed Interest Rates

Interest rates that remain the same throughout the term of the loan, bond, mortgage, or any financial product.

Interest Rate

The cost of borrowing money expressed as a percentage of the total amount borrowed, or the interest income earned on an investment.