Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch.
Suppose Player 1 and Player 2 enter into a binding agreement in which Player 1 agrees to pay Player 2 a fixed amount of money to get Player 2 to play Up when it is Player 2's turn. How much will Player 1 have to pay Player 2 to get Player 2 to play Up?
A)$0.
B)at least $10.
C)at least $20.
D)at least $50.

Question

Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch.   
Suppose Player 1 and Player 2 enter into a binding agreement in which Player 1 agrees to pay Player 2 a fixed amount of money to get Player 2 to play Up when it is Player 2's turn. How much will Player 1 have to pay Player 2 to get Player 2 to play Up?
A)$0. 
B)at least $10. 
C)at least $20. 
D)at least $50.

Quizplus · Accepted Answer

Under this agreement, Player 1 will play Up. Thus, Player 2 could earn $50 by playing Down or $30 by playing up. This means that Player 1 will have to pay Player 2 at least $20 to get Player 2 to play Up.

Player 1 and Player 2 Are Playing a Game in Which