Question

NFL players and owners are trying to negotiate a new labor contract. The owners are getting ready to send the contract over to the players who can then choose to accept the terms or keep bargaining. The owners are deciding whether to stipulate 16 games or 18 games as part of the contract. They would prefer 18 games, but they are worried that the players will not accept the contract and will keep bargaining if they put 18 games in the contract. The situation is described by the sequential game tree below: In the Nash equilibrium, the owners will choose ____________ and the players will respond by choosing to _________________.

Answer 1

The answer is "16 games; accept the terms".

Step-by-step explanation:

In this case, the players will decide the strategy first, followed by the owners.

Participants will choose the Keep Bargaining strategy to maximize its reward in the subgame of Owners' 18 games. "As a consequence, and here is the outcome:"

Players will choose the Accept Terms strategy to maximize the reward in the subgame Players on Owners' 16 games. (350M) and (250M) are the results.

To get a larger payout of $350M, the Owner would have to select a strategy among 16 games. Nash equilibrium is ($350M, $250M) in this case. It implies that the Owner's strategy in Nash equilibrium is to play 16 games, while the Players' strategy is to accept Terms.