The negotiation. Two persons who met through Craigslist are negotiating the pric

Question

The negotiation. Two persons who met through Craigslist are negotiating the price of a laptop. The seller is asking S500 for the computer (let's say it's the actual value of the computer). The buyer has the option to pay the asked price or to bargain; if the buyer decides to bargain he has the choice to low-ball ($250) or to ask for a 10% discount. For each of these options, the seller can either: refuse, accept or propose to split the difference (8375 for the low ball offer and $475 for the discount); this last option allows the buyer to either accept or refuse that counter-offer. If there is no agreement, both players loose $50 in the time and effort put into meeting (notice that this loss is always there, no matter what they end up doing). Put this game in extensive form and say whether it has a solution. If there is a solution, describe it. Still regarding the previous example; can you think of a simple change to the rules of the game that would make the buyer prefer to bargain?

Explanation / Answer

As can be seen in the question and graph, consumer pay $500 and sellers receive $800 at output 14 units of labtop.

Therefore, it is clear government bear subsidy cost = 800 -500 = 300 per labtop.

Total cost of subsidy to government= 14* 300

=$4,200,

Therefore government should budget $4,200 for the subsidy.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.