Alexandra and Beatrice are deciding where to live during college. Alexandra can live at her parents house which costs nothing and provides a value of $500 to her. Beartice can lease an apartment by herself providing a value of $1000 at the cost of $600. Alexandra and Beatrice can also live together which still costs $600 and provides $1000 of value to both. Beatrice already lives in the apartment, but to move in will cost Alexandra $100. A. Find the outside option value for each person Ex Ante B. What is the maximum total benefit generated by people working together? C. Find the nash bargaining payoff for each person. Ex Post Now assume that Alexandra has moved in and incurred the cost. Alexandra cannot live with her parents unless she moves back, costing another $100. D. Find the new outside option for each person. E. Find the new nash bargaining payoff for each person.
Alexandra and Beatrice are deciding where to live during college. Alexandra can live at her parents house which costs nothing and provides a value of $500 to her. Beartice can lease an apartment by herself providing a value of $1000 at the cost of $600. Alexandra and Beatrice can also live together which still costs $600 and provides $1000 of value to both. Beatrice already lives in the apartment, but to move in will cost Alexandra $100. A. Find the outside option value for each person Ex Ante B. What is the maximum total benefit generated by people working together? C. Find the nash bargaining payoff for each person. Ex Post Now assume that Alexandra has moved in and incurred the cost. Alexandra cannot live with her parents unless she moves back, costing another $100. D. Find the new outside option for each person. E. Find the new nash bargaining payoff for each person.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alexandra and Beatrice are deciding where to live during college. Alexandra can live at her parents house which costs nothing and provides a value of $500 to her. Beartice can lease an apartment by herself providing a value of $1000 at the cost of $600. Alexandra and Beatrice can also live together which still costs $600 and provides $1000 of value to both. Beatrice already lives in the apartment, but to move in will cost Alexandra $100.
A. Find the outside option value for each person Ex Ante
B. What is the maximum total benefit generated by people working together?
C. Find the nash bargaining payoff for each person. Ex Post
Now assume that Alexandra has moved in and incurred the cost. Alexandra cannot live with her parents unless she moves back, costing another $100.
D. Find the new outside option for each person. E. Find the new nash bargaining payoff for each person.
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