Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 17, Problem 11Q
To determine
Meaning of bargaining power and the two factors that influence it.
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Chapter 17 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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- What is the difference between macroeconomics and microeconomics? And where would game theory fall within these?arrow_forwardHow do you solve for the Nash equilibriumarrow_forwardFrom your own understanding on the concept of “Game Theory”, what can you conclude about the relationship between rules of the game and the outcome that results?arrow_forward
- Consider the following story: Charlie finds two fifty-pence pieces on the floor. His friend Dylan is standing next to him when he finds them. Chris can offer Dylan nothing at all, one of the fifty-pence pieces, or both. Dylan observes the offer made by Charlie, and can either accept the offer (in which case they each receive the split specified by Charlie) or reject the offer.If he rejects the offer, each player gets nothing at all (because Charlie is embarassed and throws the moneyaway).(a) Formulate this interaction as an extensive-form game. To keep things simple, players’ payoff is equal to their monetary gain.(b) List all histories of the game. Split these into terminal and non-terminal histories.(c) What are the strategies available to Charlie? What are the strategies available to Dylan? Draw the strategic-form game.(d) Find the pure-strategy Nash equilibria of this game.(e) What do you think will happen?arrow_forwardYou have just played rock, paper, scissors with your friend. You chose scissors and he chose paper, so you won. Is this a Nash equilibrium? Explain why or why not.arrow_forwardUse the scenario below to answer the question. Chocolate raisin protein bars are Duc’s favorite dessert. A local bakery sells them for $1.00 each. Duc buys one and eats it at the bakery. Duc decides that he wants another one, but is not willing to pay full price. He knows the owner of the bakery and wants to negotiate. He offers to buy two more protein bars at $0.75 each. He plans to eat one at the store and anther one later. The bakery owner agrees to the deals. What is the total utility of Duc’s decision? 00 75 50 00arrow_forward
- Review Chapter 15, Table 15.4, Prisoner Dilemma. Suppose the game starts with both Jesse and Frank planning to “Stay Mum” in the lower right cell. Discuss how each player would evaluate the situation and decide whether to change decisions. If each player makes decisions to minimize the penalty, in which cell will this game end? Is there a Nash equilibrium?arrow_forwardSuppose a $1 bill is to be divided between two players according to a simultaneous-move, one-shot bargaining game. Is there a Nash equilibrium to the bargaining game if the smallest unit in which the money can be divided is $0.01? Assume that if the players ask for more in total than is available, they go home empty-handed.arrow_forwardConsider the following simultaneous move game: a. What is the maximum amount player 1 should be willing to pay for the opportunity to move first instead of moving at the same time as player 2? Explain carefully. b. What is the maximum amount player 2 should be willing to spend to keep player 1 from getting to move first?arrow_forward
- You have a dozen shirts and your roommate has six pairs of shoes worth roughly the same amount of money. You decide to swap six shirts for three pairs of shoes. In financial terms, neither of you gains anything. Explain why you are nevertheless both likely to be better off.arrow_forwardWhat is prisoners dilemma? and how it works? Explain in detailarrow_forwardAssume that two people are bargaining over how to split the surplus of their joint efforts, which total $100. The only difference between the two is that player A has an associated interest rate of 5 percent and player B has an associated interest rate of 20 percent. Based on Nash bargaining theory, what share of the $100 ill Player A wind up with? (Please provide your answer in $ style format)arrow_forward
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