Consider a game in which each of three men is given $20. All three must secretly decide whether they will contribute any part of their $20 to a trust fund. At the end of the game, each player will receive 40% of the total money contributed to the trust fund, in addition to any of the remaining $20 that he is holding. If the first two players contribute $20 to the trust fund, the third player should contribute $_____ to maximize his individual earnings at the end of the game.
A) 24
B) 20
C) 8
D) 0

Question

Quizplus · Accepted Answer

If the first two players contribute $20 each to the trust fund, the total in the fund will be $40. The third player contributing $0 maximizes his earnings because he keeps his initial $20, and still receives 40% of the $40 in the trust fund (which is $16) from the contributions of the first two players, totaling $36. Contributing any amount would only decrease his total earnings.

Consider a Game in Which Each of Three Men Is