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Consider the Following 2-Person Sequential Move Game with Elizabeth and Bridget

Question 8

Multiple Choice

Consider the following 2-person sequential move game with Elizabeth and Bridget. Elizabeth moves first and either chooses TOP or BOTTOM. Bridget gets to see Elizabeth's choice and then responds with either LEFT or RIGHT. The game ends after Bridget's choice. If Elizabeth chooses TOP and Bridget chooses LEFT, then Elizabeth gets $8 and Bridget gets $2. If Elizabeth chooses TOP and Bridget chooses RIGHT, then Elizabeth gets $0 and Bridget gets $0. If Elizabeth chooses BOTTOM and Bridget chooses LEFT, then Elizabeth gets $5 and Bridget gets $4. If Elizabeth chooses BOTTOM and Bridget chooses LEFT, then Elizabeth gets $A and Bridget gets $B. Assuming that players are payoff maximizers, which of the following must be true for {BOTTOM, RIGHT} to be the subgame perfect equilibrium using backward induction?


A) $B > $4; $A > $8.
B) $B > $4; $A < $8.
C) $B < $4; $A < $5.
D) $B < $4; $A < $8.

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