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Bargaining theory Suppose Rick is looking for a new assistant for his upcoming adventure to harvest...

Bargaining theory

Suppose Rick is looking for a new assistant for his upcoming adventure to harvest Mega Seeds. Rick estimates that he can earn $5,000 if he goes alone or $7,000 if he hires Morty. If Morty doesn’t take the trip he’s stuck at home watching TV with Jerry, which is completely worthless to him.

1. What is Rick’s threat value? Morty’s?

2. What might be the wage that Rick offers Morty if he uses the “reasonable solution” bargaining outcome1? What is each person’s payoff?

3. What is the least amount Morty would accept to go on the adventure? What is the most Rick would be willing to pay Morty?

4. Suppose Rick invents a robot that costs him $1,000 to build, but will earn him $7,000 on the trip. How does this change the reasonable solution outcome? Why?

business   economics   
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Answer #1

Suetion iventah goes aslone 8 チ3,000 if he hires Haty feat value of rrokalole loss dsto inagreemet due tv a laye equiva lent to -Rreat Value of Rick=loss of income -) Hatys-Kreat value 는 Loss of income due to ②. Rieks easing 찮 he hires HPky 丰7000 S2000 → Undo garso rable agreem end ot Nash koga ring, eoch par^y equally shaes tRe eaviriry 宇7000 | 2 Rick $ 3500 -)--The geag nake agreement a con-coin s no one uon8 Lose ⅛rom Proces3 The Ricks threat value a income ra· he eloes not hire HB1tul = $2000 = キ2000-$3.49=チ1996-si OS l006b Conig Rek These fae, net eaning t Rick ft he use Solot golttニチ7000 ก๊า trip = $7000-$ 1000 96000 OrdeS) onable agreemen Nh boing 6000|2 = 3000 ro et H8Hy-600/2 3000

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