We will call the people A, B & C in the order that they
speak.
A does not know what colour hat he is wearing. A would
only know what colour hat he was wearing if he could see that B & C were both
wearing red hats, (as there were only two
red hats in the cupboard.) This is not the case so either:-
B & C are both wearing blue hats
OR
one
of B & C is wearing
red and the other is wearing
blue
When B speaks we obviously assume he has thought of all
of this. When B looks at C if C were wearing red
then he would know that he must be wearing blue
as they can't both be wearing red. But this does
not happen so C must be wearing blue, meaning
that B doesn't know if he is wearing red or
blue:
The third person must be wearing a
BLUE hat
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