How many cookies player one offer to player two equilibrium

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Reference no: EM133750200

Problem

Consider a situation where two children are deciding how to split 12 cookies. The older child (player 1) makes a proposal to the younger child (player 2), of how many cookies each of them should receive.

• If player 2 accepts player 1's proposal, they split the cookies accordingly.

• If player 2 rejects player 1's proposal, both children go crying to their dad, who eats 4 of the cookies himself, then splits the rest of the cookies evenly among the children.

• The payoffs for the children are how many cookies they receive.

Assuming that player 2 will accept a proposed split if he is indifferent between accepting and rejecting, how many cookies does player 1 offer to player 2 in equilibrium?

Reference no: EM133750200

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