RB_CH01_Q026. Five hats three blue two red

Inside of a dark closet are five hats: three blue and two red. Three smart men go into the closet, and each selects a hat in the dark and places it unseen upon his head. Each man knows both that the closet contains three blue hats and two red hats and that the other two men have the same knowledge. Once outside the closet, no man can see his own hat. The first man looks at the other two, thinks, and says, 'I cannot tell what color my hat is.' The second man hears this, looks at the other two, and says, 'I cannot tell what color my hat is either.' The third man hears all this, is blind and cannot see the other two but says, 'Well, I know what color my hat is.' What color is his hat, and how does he know?