Exam 12: Bargaining

Andrew wants to purchase Adam's car. Andrew is prepared to pay a maximum of $2,000. Adam is not willing to accept anything lower than $1,000. Suppose that any failure to reach an agreement reduces Andrew's and Adam's gain from bargaining by 10 percent. If there is no limit to the number of negotiating rounds, how much should Andrew offer for Adam's car?

It is March and Ozzie wants to purchase Harriet's season tickets to Boston Red Sox games. Ozzie is willing to pay up to $4,000 for the tickets. Harriet will accept no less than $3,000. Suppose that any failure to reach an agreement reduces Ozzie's and Harriet's gain by 20 percent. If there is no limit to the number of negotiating rounds, what percentage of the surplus should Ozzie receive?

-Consider the one-time Nash bargaining game depicted in Figure 12.1 in which A and B individuals are bargaining over the distribution of $40. Bids must be in increments of $10. In this game, the sum of the players' bids cannot exceed $40. If the sum of the bids are less than $40, each bidder receives his or her bid, and the rest goes to charity. If the sum of the bids exceeds $40, the bidders receive nothing, and $40 is given to charity. The most likely Nash equilibrium strategy profile for this game is:

Molly is interested buying Polly's antique doll house. Molly is prepared to spend up to $2,500. Polly will not sell the doll house for less than $2,000. Molly and Polly are prepared to bargain over the doll house until "hell freezes over." Suppose Molly makes the first offer, there is an even number bargaining rounds.

-Consider the one-time Nash bargaining game depicted in Figure 12.2 in which Gog andMagog are bargaining over the distribution of $100. Bids must be in increments of $50. In this game, the sum of the players' bids cannot exceed $100. If the sum of the bids are less than $100, each bidder receives his bid, and the rest is forfeited to the Exchequer. If the sum of the bids exceeds $100, the bidders receive nothing, and $100 is forfeited to the Exchequer. The most likely Nash equilibrium strategy profile for this game is:

Andrew wants to purchase Adam's car. Andrew is prepared to pay a maximum of $2,000. Adam is not willing to accept anything lower than $1,000. Suppose that any failure to reach an agreement reduces Andrew's and Adam's gain from reaching an agreement by 10 percent and 5 percent, respectively. If there is no limit to the number of negotiating rounds, what percentage of the bargaining surplus will Andrew receive?

Nash bargaining is an example of a:

Beanie wishes to purchase Cecil's house. The most that Beanie is willing to pay is $300,000. The least that Cecil is willing to accept is $250,000. Suppose that any failure to reach an agreement reduces Beanie's gain by 3 percent and reduces Cecil's gain by 7 percent. If there is no limit to the number of bargaining rounds, what percentage of the bargaining surplus should Beanie receive?

-Consider the one-time Nash bargaining game depicted in Figure 12.1 in which individuals A and B individuals are bargaining over the distribution of $40. Bids must be in increments of $10. In this game, the sum of the players' bids cannot exceed $40. If the sum of the bids are less than $40, each bidder receives his or her bid, and the rest goes to charity. If the sum of the bids exceeds $40, the bidders receive nothing, and $40 is given to charity. How many possible Nash equilibria are there for this game?

Beanie wishes to purchase Cecil's house. The most that Beanie is willing to pay is $300,000. The least that Cecil is willing to accept is $250,000. Suppose that any failure to reach an agreement reduces Beanies gain by 7 percent and reduces Cecil's gain by 3 percent. If there is no limit to the number of bargaining rounds, how much should Beanie offer for the house?

Beanie wishes to purchase Cecil's house. The most that Beanie is willing to pay is $300,000. The least that Cecil is willing to accept is $250,000. Suppose that any failure to reach an agreement reduces Beanie's gain by 3 percent and reduces Cecil's gain by 7 percent. If there is no limit to the number of bargaining rounds, what percentage of the bargaining surplus should Cecil receive?

Molly is interested buying Polly's antique doll house. Molly is prepared to spend up to $2,500. Polly will not sell the doll house for less than $2,000. Suppose that any failure to reach an agreement reduces Molly's and Polly's gain by 20 percent. If there is no limit to the number of bargaining rounds, how much should Polly accept for the antique doll house?

Beanie wishes to purchase Cecil's house. The most that Beanie is willing to pay is $300,000. The least that Cecil is willing to accept is $250,000. Suppose that any failure to reach an agreement reduces Beanies gain by 7 percent and reduces Cecil's gain by 3 percent. If there is no limit to the number of bargaining rounds, what percentage of the bargaining surplus should Cecil receive?

It is March and Ozzie wants to purchase Harriet's season tickets to Boston Red Sox games. Ozzie is willing to pay up to $4,000 for the tickets. Harriet will accept no less than $3,000. Suppose that any failure to reach an agreement reduces Ozzie's and Harriet's gain by 20 percent. If there is no limit to the number of bargaining rounds, how much should Ozzie offer Harriet?

-Consider the one-time Nash bargaining game depicted in Figure 12.2 in which Gog andMagog are bargaining over the distribution of $100. Bids must be in increments of $50. In this game, the sum of the players' bids cannot exceed $100. If the sum of the bids are less than $100, each bidder receives his bid, and the rest is forfeited to the Exchequer. If the sum of the bids exceeds $100, the bidders receive nothing, and $100 is forfeited to the Exchequer. The most likely explanation for the outcome of this bargaining game is the:

Suppose that management and labor are bargaining over the distribution of excess profits amounting to $200 per worker. Suppose that failure to reach an agreement an agreement reduces management's share of the surplus by 5 percent per round and reduces labor's share of the surplus by 7 percent per round. If there is an unlimited number of negotiating rounds, what percentage of the excess profits should management offer labor in the first round?

Molly is interested buying Polly's antique doll house. Molly is prepared to spend up to $2,500. Polly will not sell the doll house for less than $2,000. Suppose that any failure to reach an agreement reduces Molly's gain by 15 percent and will reduce Polly's gain by 25 percent. If there is no limit to the number of bargaining rounds, what percentage of the bargaining surplus will Polly receive?

The bargaining situation described in question 12.1 is an example of a coordination game. The most likely outcome is the strategy profile:

Suppose that management and labor are bargaining over how much of a surplus to give to workers. The $100 can be divided into $25 increments. The sides simultaneously write the amount that they want on a piece of paper. If the sum of the amounts does not exceed $100 then the both sides get the amount that they asked for. If the sum of the amounts exceeds $100 then the bargaining ends in a stalemate. Assume that failure to come to an agreement costs both union and management $1. How many Nash equilibria does this game have?

Nash bargaining refers to: