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Thursday, July 7, 2005

an interesting question for you game theorists out there

For all you game theorists out there.

Here is a simple game with two players, A and B. A is given $1000 and is able
to split it between he and B any way he chooses. B has the option to accept or
reject the offer. If he accepts the offer, the money is divided according to
A's split. If B rejects the offer, both players get nothing.

At face value, this game isn't interesting if played one time. B should always
accept. However, if this game is played 1000 times. it gets more interesting.
What is A's optimal offer strategy? What is B's optimal strategy

1 comment:

Chilly said...

My training tells me that by playing the game once, A can offer any split and B will accept. By playing 1000 times....

If I am B I reject any offer less than 1/999 in my favor. If A gets to this point sooner than trial # 499 then I am ahead.

In poker terms B has position. He has the power due to the repeated observation.

On the other hand, I only thought about this for about 30 seconds, so....