Question

QUESTION 1

Please refer to the bargaining game presented below matrix. What is the Nash equilibrium for this game?

		Labor
		Bargain Hard	Be Nice
Management	Bargain Hard	0 (Bargain Hard), 0 (Labor)	20 (Bargain Hard), 10 (Labor)
	Be Nice	12 (Bargain Hard),18 (Labor)	15 (Bargain Hard),15 (Labor)

	A.	Both players are nice
	B.	Both players bargain hard
	C.	One player bargains hard and the other player is nice
	D.	A Nash equilibrium does not exist for this game

  

QUESTION 2

Which of the following conditions would provide more bargaining power for the buyer relative to the seller?

A.           There are lots of substitutes for the seller's product

B.           There are relatively few buyers and many sellers

C.           Buyers can easily switch from one seller to another

D.           All of the above

QUESTION 3

Suppose both sides in a bargaining situation increase the value of their outside options by $5,000. What is the likely impact of this change on the bargaining outcome?

A.           The bargaining outcome increases by $2,500 for each party

B.           The bargaining outcome remains the same

C.           The bargaining outcome increases by $10,000 for each party

D.           Each party increases their share of the bargaining surplus by $5,000

QUESTION 4

You own a specialty chemical manufacturing business. Your sales manager contributes $200,000 to your net returns due to her efforts, and you negotiate her salary to be $110,000. What is the implied value of her outside option?

A.           $0

B.           $5,000

C.           $10,000

D.           $20,000

QUESTION 5

Kate and Allie work as advertising executives in a small agency, and they are thinking about starting their own agency. Kate earns $60,000 in her current job, Allie earns $40,000 in her current job, and they expect to earn $160,000 profits from the new agency. How should they split these profits if they start the new business?

A.           Kate should earn $90,000 and Allie should earn $60,000

B.           Kate and Allie should each earn $80,000 from the new business

C.           Allie should get $90,000 and Kate should get $70,000

D.           Kate should get $90,000 and Allie should get $70,000

Answer 1