Negotiating with a Deadline

Negotiating with a Deadline - Negotiating with a Deadline...

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Negotiating with a Deadline Mortimer and Hotspur are to divide $100 between themselves. Each of the bargainers knows that the game has the following structure: Stage 1: Mortimer proposes how much of the $100 he gets. Then either Hotspur accepts it, in which case the game ends and Hotspur receives the remainder of the $100; or Hotspur rejects it, in which case the game continues. Stage 2: The sum to be divided has now shrunk to $90. Hotspur makes a proposal for his share of the $90. Then Mortimer either accepts it and gets the remainder; or rejects it, in which case each receives nothing and the game ends. What will Mortimer demand at the first stage? Mortimer must imagine the game has reached the second stage. Hotspur is now in a strong position and can demand almost all of the $90, leaving Mortimer just enough so that he doesn't say no because of spite. This game shows that the last person to make the offer can capture most of the remaining gains from trade. So, get your offer in before the deadline so that your
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