It's a game theory bargaining game problem.I'm not familiar with cursive writing. Think of two period bargaining game in which a consumer and a seller trade a good.The consumer buys a good if its price p is less than the value 10. The seller sells a good if its pricep is higher than the cost 5.The timing is like. The seller firsts offer p first then the consumer decides to take or leave. If the consumer takes it, its payoff is p-c for the seller and v-p for the consumer. If it isrejected, the consumer offers another offer p2 to the seller. Again, if the seller accepts, the payoff is p2-c for the seller and v-p2 for the consumer.Moreover, there are discount factors delta1=0.8 for the seller and delta2=0.7 for the buyer in the second period.1) In the 2nd stage (i.e. when the buyer offers p2), the consumer offers p2=and the seller is supposed to accept all offer if p2 is greater and equal to2) In the first stage, (i.e. when the seller offers p), the seller offers p=and the buyer takes all offers if p is less than equal to3) At the equilibrium, the payoffs are that the buyer's payoff iswhile the seller's payoff is

This model highlights the ever-changing nature of negotiations, where offers and counteroffers are…

Answered: Think of two period bargaining game in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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It's a game theory bargaining game problem.

I'm not familiar with cursive writing.

Think of two period bargaining game in which a consumer and a seller trade a good.
The consumer buys a good if its price p is less than the value 10. The seller sells a good if its pricep is higher than the cost 5.
The timing is like. The seller firsts offer p first then the consumer decides to take or leave. If the consumer takes it, its payoff is p-c for the seller and v-p for the consumer. If it is
rejected, the consumer offers another offer p2 to the seller. Again, if the seller accepts, the payoff is p2-c for the seller and v-p2 for the consumer.
Moreover, there are discount factors delta1=0.8 for the seller and delta2=0.7 for the buyer in the second period.
1) In the 2nd stage (i.e. when the buyer offers p2), the consumer offers p2=
and the seller is supposed to accept all offer if p2 is greater and equal to
2) In the first stage, (i.e. when the seller offers p), the seller offers p=
and the buyer takes all offers if p is less than equal to
3) At the equilibrium, the payoffs are that the buyer's payoff is
while the seller's payoff is

Definition Definition Economic decision-making framework that analyzes how different players optimize their outcomes with given pay-offs corresponding to their available strategies. The assumptions of game theory are: The number of players or competitors are finite/limited; All participants are rational The rules of the game are known to every player; and Each participant has a finite set of actions. A common way in which game theory is presented as an ( m x n ) matrix in which m represents the strategies of row player and n represents the strategies of column player. There are several limitations of game theory: Many businesses have a large number of competitors, and selecting an optimal strategy in these circumstances is difficult; Real-life business operating environments are full of uncertainty and difficult to model as a game theory; and The assumption of rationality and utility maximization isn't always an accurate portrayal of human nature.

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