You and a classmate (let\'s call him Dave) discover that your economics teacher

Question

You and a classmate (let's call him Dave) discover that your economics teacher has been secretly talking about notions such as "love," "fairness," and "decency." Desperate to preserve his reputation in the community of economists, he tries to buy your silence in the following way. He says to you, "You two sit silently at a table. I'll put a hundred-dollar bill down. You can take the bill, or pass the decision to Dave. Before Dave decides, I'll put another hundred-dollar bill on the table. If he passes, I'll add yet another bill to the table and you can have another turn. The game will end when someone takes the money, or when the $500 in my wallet is gone, whichever comes first. "You both agree to keep quiet about your instructor's transgressions for the chance to play the game, and as your teacher indicated, you get the first turn. Based on this information, how much do you expect that your economic teacher will have to spend? A. $100 B. $300 C. $400 D. $500 You and a classmate (let's call him Dave) discover that your economics teacher has been secretly talking about notions such as "love," "fairness," and "decency." Desperate to preserve his reputation in the community of economists, he tries to buy your silence in the following way. He says to you, "You two sit silently at a table. I'll put a hundred-dollar bill down. You can take the bill, or pass the decision to Dave. Before Dave decides, I'll put another hundred-dollar bill on the table. If he passes, I'll add yet another bill to the table and you can have another turn. The game will end when someone takes the money, or when the $500 in my wallet is gone, whichever comes first. "You both agree to keep quiet about your instructor's transgressions for the chance to play the game, and as your teacher indicated, you get the first turn. Based on this information, how much do you expect that your economic teacher will have to spend? A. $100 B. $300 C. $400 D. $500

Explanation / Answer

B. $300

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