Recall the Ultimatum bargaining game that we studied in class. Two individuals would like to split $100 and use the following procedure: Person 1 offers person 2 an amount of money x ≥ 0 up to $100. Then person 2 either accepts or rejects the offer x. If person 2 accepts the offer, then 1 receives the remainder of the $100, $100 − x. I person 2 rejects the offer, then each individual obtains $0. Assume the amount $100 is a continuum.
What is the subgame perfect equilibrium of the Ultimatum game?
a. The players split $100 evenly: (50, Accept).
b. Player 1 offers player 2 $1, but player 2 rejects: (1, Reject).
c. Player 1 offers player 2 $0, and player 2 accepts: (0, Accept).
d. Player 1 offers player 2 $100, and player 2 accepts: (100, Accept).