1) Bargaining Adam has a car in good condition that he uses daily and that he values at 4000$. Blair values the same car at 4300$. Blair has 5000$ to spend. Adam has received an offer for 3500$ from a third party. a) What are the threat points for Adam and Blair? What is the surplus they could get from cooperating? What is the range of prices for the sale of the car that can support that cooperative outcome? b) Now suppose that the offer from the third party is 4200$. What are the new threat points? What is the new surplus of cooperation between Adam and Blair? c) Finally, suppose that the seller of a car has to pay a tax of 200$ and the buyer of a car has to pay registration fee of 150$. There is no offer from a third party. What are the threat points? What is the new surplus from cooperation? What is the range of prices that

1) Bargaining Adam has a car in good condition that he uses daily and that he values at 4000$. Blair values the same car at 4300$. Blair has 5000$ to spend. Adam has received an offer for 3500$ from a third party. a) What are the threat points for Adam and Blair? What is the surplus they could get from cooperating? What is the range of prices for the sale of the car that can support that cooperative outcome? b) Now suppose that the offer from the third party is 4200$. What are the new threat points? What is the new surplus of cooperation between Adam and Blair? c) Finally, suppose that the seller of a car has to pay a tax of 200$ and the buyer of a car has to pay registration fee of 150$. There is no offer from a third party. What are the threat points? What is the new surplus from cooperation? What is the range of prices that

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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