Consider the following 2-person sequential move game with Emilio and Janna. Emilio moves first and either chooses TAKE or PASS. If Emilio chooses TAKE, then the game ends. In this case, Emilio earns $35 and Janna earns $20. However, if Emilio chooses PASS then Janna gets to move. Janna can choose either LEFT or RIGHT. If Janna chooses LEFT, then Emilio gets $50 and Janna gets $10. If Janna chooses RIGHT, then both Emilio and Janna get $25 each. Assuming that players are payoff maximizers, if you solve this game using backward induction, then the subgame perfect equilibrium is one where:
A) a. Emilio Chooses TAKE at the very beginning and the game ends.
B) Emilio chooses PASS and Janna chooses LEFT.
C) Emilio chooses PASS and Janna chooses RIGHT.
D) Emilio chooses TAKE and Janna chooses LEFT.

Question

Quizplus · Accepted Answer

Emilio chooses TAKE at the very beginning and the game ends. This is the subgame perfect equilibrium because it is the only outcome that is not Pareto dominated by any other outcome.

Consider the Following 2-Person Sequential Move Game with Emilio and Janna