“While if Alice convinced Bob that she would give a high claim, Bob’s best response is to give a high claim.” Why? He gets a higher payoff by giving a low claim.
If Alice claims close to $100 (say, $80), Bob gets a higher payoff claiming $100 (getting $78) instead of claiming $2 (getting $4).
Ohh, I thought it’s 2$ per dollar of difference between them. Okay.
“While if Alice convinced Bob that she would give a high claim, Bob’s best response is to give a high claim.” Why? He gets a higher payoff by giving a low claim.
If Alice claims close to $100 (say, $80), Bob gets a higher payoff claiming $100 (getting $78) instead of claiming $2 (getting $4).
Ohh, I thought it’s 2$ per dollar of difference between them. Okay.