題組內容

2. (9 %)

Consider two players in a game: Legislator (L) and the Judiciary (J). The Legislator and the Judiciary negotiate a bill $B$ to be executed from a policy space $\mathcal{B} = [0,10]$, where $B0 = 0$ is the status quo. Legislator's favorite policy is $BL^* = 9$, and Judiciary's favorite policy is $B_J^* = 3$.

The game has 2 stages and proceeds as follows:







Define player \( i \)'s payoff as \( \pi_i = |B_i^* - B| \). Assume that the Judiciary will not reject the bill if rejecting the bill is indifferent to her.

(a) Under the Subgame Perfect Nash Equilibrium, what is the equilibrium bill passed, \( B_{SPNE} \)?