Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 15, Problem 15.4IP
To determine
The most likely outcome of the given negotiation.
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Students have asked these similar questions
The following represents the potential outcomes of your first salary negotiation after graduation: Assuming this is a sequential move game with the employer moving first, indicate the most likely outcome. Does the ability to move first give the employer an advantage? If so, how? As the employee, is there anything you could do to realize a higher payoff?
The below figure represents the potential outcomes of your first salary negotiation after graduation. Assuming this is a sequential-move game with the employer moving first, indicate the most likely outcome. Does the ability to move first give the employer an advantage? If so, how? As the employee, is there anything you could do to realize a higher payoff?
You could choose any position A (the first mover) or B (the second mover) in
the following three bargaining games. For each game (I, II, or III), explain which
player (A or B) you would pick in order to maximize your expected payoff?
1. Game I (one stage): A will make the first move and offer her partner a portion
of 6 dollars. If the offer is accepted, the bargain is complete and each player gets an
amount determined by the offer. If the offer is declined, each player gets nothing.
2. Game II (two stages): A will make the first move and offer her partner
a portion of 12 dollars. If the offer is accepted, the bargain is complete and each
player gets an amount determined by the offer. If the offer is declined, the 12 shrinks
to 5 and B then gets a turn to make an offer. Again, the bargain is complete if A
accepts and the division is made according to the terms of the offer. If player A
declines the offer, each player gets nothing.
3. Game III (three stages): A will make the first move…
Chapter 15 Solutions
Managerial Economics: A Problem Solving Approach
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- Management and a labor union are bargaining over how much of a $50 surplus to give to the union. The $50 is divisible up to one cent. The players have one shot to reach an agreement. Management has the ability to announce what it wants first, and then the labor union can accept or reject the offer. Both players get zero if the total amounts asked for exceed $50. Which of the following is a Nash equilibrium? Management requests $25 and the labor union accepts $10. Management requests $35 and the labor union accepts $10. Management requests $20 and the labor union accepts $20. Management requests $50 and the labor union accepts $0.arrow_forwardIn the manager-employee game (work-shirk)? What happens if one of them plays a pure strategy? Please explain.arrow_forwardConsider the following situation: five individuals are participating in an auction for an old bicycle used by a famous cyclist. The table below provides the bidders' valuations of the cycle. The auctioneer starts the bid at an offer price far above the bidders' values and lowers the price in increments until one of the bidders accepts the offer. Bidder Value ($) Roberto 750 Claudia 700 Mario 650 Bradley 600 Michelle 550 What is the optimal strategy of each player in this case? Who will win the auction if each bidder places his or her optimal bid? If Claudia wins the auction, how much surplus will she earn?arrow_forward
- Well explained answer and well labeledarrow_forwardA Nash Equilibrium is the equilibrium of a game in which; Both players get the largest payoff amount Both players get the best payoff independent of what the other players choices are Both player, with the knowledge of what the other players possible moves are, do not have incentive to deviate from their strategy There is incomplete information of the game and each player makes the move that is best for them and their payoff outcomearrow_forwardEconomics Game theory: Consider a collective action game with thirty individuals (N = 30). When the number of participants in the joint project is n, each individual, including shirkers, receives a benefit of B(n) = 18n and each participant incurs a cost of C(n) = 32 – 2n. Please answer the questions I am asking! 1. Find all of the Nash equilibria, both stable and unstable ones. 2. Find the socially optimal outcome. 3. Check if any of the Nash equilibria is socially optimal. Explain your answer.arrow_forward
- QUESTION FOUR: GAME THEORY Two players: The employee (Linda) and the employer (Vera). Linda has to choose whether to pursue training that costs K1, 000 to herself or not. Vera has to decide whether to pay a fixed wage of K10,000 to Linda or share the revenues of the enterprise 50:50 with Linda. The output is positively affected by both training and revenue sharing. Indeed, with no training and a fixed wage total output is K20, 000, while if either training or profit sharing is implemented the output rises to K22, 000. If both training and revenue sharing are implemented the output is K25,000. a. Construct the pay-off matrix b. Is there any equilibrium in dominant strategies? c. Can you find the solution of the game with Iterated Elimination of Dominated Strategies? d. Is there any Nash equilibrium?arrow_forward3. Three politicians are voting on whether to allow themselves a salary increase of $3,500 per year. If they vote in favour of a raise, then they lose some public support, costing them each $1,500 per year. The salary increase passes if two or more politicians vote in favour of it. What is this game's Nash equilibrium (or equilibria)? Explain. There is no need to draw a payoff matrix. (20%)arrow_forwardConsider the following scenarios in the Ultimatum game, viewed from the perspective of the Recipient. Assume that the Recipient is motivated by negative reciprocity and will gain $15 of value from rejecting an offer that is strictly less than 50 percent of the total amount to be divided between the two players by the Proposer. Assume that the Proposer can only make offers in increments of $1. If the pot is $30, what is the minimum offer that the Responder will accept? What percent of the pie is this amount? The minimum offer that will be accepted is S. which represents percent of the pie. If the pot is $100, what is the minimum offer that the Responder will accept? What percent of the pie is this amount? The minimum offer that will be accepted is S, which represents percent of the pie. (Round answers to 2 decimal places as needed)arrow_forward
- Use the following payoff matrix to answer the questions below. Cooperate Defect 1 Cooperate 100, 100 40, 125 Defect 125, 40 50, 50 Which player (if any) has a Dominant Strategy? [ Select ] What is the Nash Equilibrium of this game? [ Select ] Does this game satisfy the definition of a prisoner's dilemma? [ Select ]arrow_forwardExamples of tradeoffs that have both monetary and non monetary costarrow_forwardIn game theory, what does the term "payoff" refer to? a) The amount of money each player has at the beginning of the game. b) The final outcome of the game. c) The utility or benefit that a player receives based on the outcome of the game. d) The number of strategies available to each player.arrow_forward
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