Scenario: Beth and Mary work as designers for a leading footwear manufacturer. Together, they came up with a new design that was successful from the day it was launched in the market. Impressed with their performance, their boss wants to reward them. He hands over $5,000 to Beth and asks her to offer Mary any amount she wants. If Mary accepts the offer, the money will be split in the decided proportion. However, if Mary rejects the offer, both of them will forgo the chance to be rewarded.
-Refer to the scenario above.Beth should use ________ to play this game.

Question

Quizplus · Accepted Answer

Beth should use backward induction to play this game. She should reason backwards from the end of the game to determine the optimal strategy. Since Mary knows the amount of the reward and the offer Beth makes, she will only accept an offer that gives her a fair share. Therefore, Beth should offer Mary a fair share of the $5,000 to ensure that she accepts the offer. A fair share would be $2,500 each, so Beth should offer Mary $2,500. This is the best choice as it ensures that both of them receive a reward and avoids the risk of losing the chance to be rewarded.

Scenario: Beth and Mary Work as Designers for a Leading