Assuming self-regarding preferences, in the Nash equilibrium of the Berg et al. trust game:
A) First movers should transfer their entire endowment to the second movers and the second movers should return the entire tripled amount.
B) First movers should transfer their entire endowment to the second movers and the second movers should keep this entire amount.
C) First movers should transfer their entire endowment to the second movers and the second movers should return half of the amount received.
D) The second movers have no incentive to return any money; anticipating that the first movers should not send any money in the first place. Both sets of players should end the game with their initial endowments.

Question

Quizplus · Accepted Answer

The correct answer is d. The second movers have no incentive to return any money; anticipating that the first movers should not send any money in the first place. Both sets of players should end the game with their initial endowments. This is because, assuming self-regarding preferences, each player is only concerned with maximizing their own payoff. Therefore, the second movers, after receiving the money, would have no incentive to return any of it. Anticipating this, the first movers would not send any money in the first place. Thus, both sets of players would end the game with their initial endowments.

Assuming Self-Regarding Preferences, in the Nash Equilibrium of the Berg