Since my prisoners' hats post seems to be the most frequently read post on my blog, I thought I'd put up another riddle. This was one of my favorites that a friend told me when he was practicing for finance job interviews.
4 pirates come across 1000 gold pieces. After a fair amount of arguing, the following system is chosen for divvying up the loot:
- The pirates will draw straws. The order of straws will determine a fixed order for the remainder of the divvying process.
- The first pirate (from the straw order) will propose a distribution of the gold. This proposal is put to a vote. If a majority (greater than 50%) of the pirates agree on the proposal, they distribute the gold appropriately and they are done. Otherwise, the first pirate is killed and they move onto the next pirate.
- Assume that pirates are perfectly rational actors that vote based upon the following desired outcomes (in preferred order):
- A pirate wants to live.
- All else being equal, a pirate wants the most gold.
- If a pirate is going to live and will get the same amount of gold through two different outcomes, the pirate will vote to see more blood.
Given all of this, what does the first pirate propose, and what is the maximum amount of gold he can take?