Andrew Wants to Purchase Adam's Car

Multiple Choice

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?

A) $1,000.
B) An amount that is somewhat greater than $1,500.
C) An amount that is somewhat less than $1,500.
D) $2,000.
E) None of the above since Andrew and Adam will be unable to negotiate a selling price.