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Respond to the question: Hi Need a little help with this bargain?

11/16/2000 09:51 AM by Brandon; Bargaining - Smarties

Thank you Walter! I've emailed a reply. [View full text and thread]

11/08/2000 08:45 AM by Walter;

There are 2 common interpretations to the discount factor. 1) Impatience: the value of a 1 unit of consumption today is higher than that of a unit of consuption tomorrow. This is captured by a parameter R<1 2) The game may end [View full text and thread]

11/07/2000 12:07 AM by Brandon; Thank you

Thanks for the recommendation. I'll go take a look at those pages :) I've a question though which I was hoping to get some clarification:- Why are the smarties discounted as time passes rather than being discounted backwards? I had [View full text and thread]

11/06/2000 09:15 AM by Walter;

Take a look at the book "Thinking Strategically" by Dixit and Nalebuff, pages 44-48 and chapter 11. It is very instructive. Think of the discount factor as "the size of the pie" that remains on table (or, suppose that after a period, [View full text and thread]

11/03/2000 10:41 AM by Brandon Poon; Hi! Need a little help with this bargaining problem :)

Player T & Player D are bargaining over 100 smarties. T gets to make the 1st move and suggest he keeps a number x. If D accepts, the game is over, if she does not, there is a 2nd round in which D suggest she keeps a number y and T decides whether to accept or not. If T rejects, he gets to make a final offer to keep a number z. If D rejects the offer this time, the game is over and both get zero smarties. Player T and Player D are very hungry and therefore 100 smarties in round t+1 are worth only 100*(discount factor, player T) and 100*(discount factor, player D) smarties in round t. Given that both discount factors are less than 1.

Draw the game tree. Find the equlibrium. Show that it pays to be patient.

Can anyone help me with this? I'm kind of stuck :) [Manage messages]