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Set up the game tree and find the equilibrium

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Assume a business is facing a financial crisis and they want to get rid of some members. Unfortunately for them there is a powerful group that represents the business. After months of negotiations the business gave the VP's administrators the right to dismiss one, and only one tenure business member.

The Vp's though wish to get rid of three members-Al, Kurt, and Neal.

Someone in the business suggests the following plan: go to Al and offer him an early retirement package and tell him that if he does not accept the offer that he will be fired. If Al accepts, go to Kurt with the same offer. If Kurt accepts, then Neal is fired.

Assume that the cost of the early retirement package is $100,000 to the business and is worth $60,000 to each member. If the business can get rid of the member the business sees a gain of $250,000.

Set up the game tree and find the equilibrium. Explain your reasoning in excruciating detail.

Reference no: EM133259883

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