Short Answer

Analyzing the Shift in Bargaining Power

In a one-shot bargaining game, a Proposer is to split $100 with a Responder. Initially, if the Responder rejects the Proposer's offer, both players receive $0. Now, consider a rule change: if the Responder rejects the offer, they receive a guaranteed payment of $25, while the Proposer still receives $0. Explain how this rule change alters the Responder's bargaining power and what the minimum offer a rational Proposer is now likely to make.

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Updated 2025-09-18

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