Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 7P
(a)
To determine
The result in November when a strike was declared in October.
(b)
To determine
Conclusion of the offer made in October using backward induction.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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.
You have decided to start a snow-plowing business whereby you will offer to plow the driveways of your neighbours' homes after heavy snowfalls. You are well known by everybody in your neighbourhood, you have a plow for the front of your truck, and you think that your neighbours would rather hire you than someone they do not know. From your research, you know that homeowners are charged an average of $40 to plow their driveways after a heavy snowfall. Interestingly, a few years ago, your research tells you that homeowners were charged an average of $25 to plow their driveways after a heavy snowfall. The average price has gone up, which excites you. Apply your learning about supply and demand to this fact pattern to analyze possible reasons for the increase in price. Consider the five factors that may impact demand and the 6 factors that may impact supply. What questions do you want answered before committing to this business?
Tom and Jerry are contestants on Jeopardy. Tom is leading with an accumulation of $12000, while Jerry trails closely at
$10000. In the final segment of the show, contestants must wager an amount not exceeding their current accumulation
that they will answer the last question of the night correctly. Wagers are made before the question is revealed. If the
contestant answers correctly, they have their wager added to their accumulation. Otherwise, it is deducted. Jerry is a game
show master and expects to answer correctly with 90% certainty. Tom is less experienced and only has a 55% chance.
Their utilities of wealth are given by uT (x) = x1 and u' (x)
50xi
a) How much should Tom wager to maximise his expected utility?
b) How much should Jerry wager to maximise his expected utility?
c) In expectation, how much money the expected winner of the show is going to win?
Chapter 17 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
Knowledge Booster
Similar questions
- A semiprofessional baseball team near your town plays two home games each month at the local baseball park. The team splits the concessions 50/50 with the city but keeps all the revenue from ticket sales. The city charges the team $100 each month for the three-month season. The team pays the players and manager a total of $1000 each month. The team charges $10 for each ticket, and the average customer spends $8 at the concession stand. Attendance averages 30 people at each home game. 1st attempt Part 1 The team earns an average of $ in revenue for each game and $ of revenue each season.With total costs of $ each season, the team finishes the season with $ of profit. Part 2 In order to break even, the team needs to sell tickets for each game. Round to the nearest whole number. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardEconomics Suppose that Russell Wilson is negotiating a contract with the Seattle Seahawks. Wilson has an offer from the Las Vegas Raiders for $30 million a year. If he signs with the Seahawks, they will earn $60 million in revenue from the signing. The Seahawks next best option is to sign Josh Allen. They would earn $45 million from signing Allen and would pay him a contract of $25 million. Russell Wilson and the Seahawks have equal bargaining power in the sense that they will split the surplus evenly. a) What is the negotiated salary between Wilson and the Seahawks under Nash Bargaining? What is Wilson's surplus and what is Seahawks surplus? b) Suppose that the Seahawks know about an injury to Josh Allen, such that they would only earn $30 million in revenue from signing Allen but would only have to pay him a contract of $20 million. What is the new negotiated salary between Wilson and the Seahawks under Nash Bargaining? What is Wilson's surplus and what is Seahawks surplus?arrow_forwardThe Mustangs Ultimate Frisbee team is selling tickets to an end-of-year BBQ. They sell 500 tickets for $2.00 each. They are planning to increase the price. A survey indicates that for every $0.20 price increase, there will be a drop of 20 tickets sold by the team. a) What is their maximum revenue that they can make? b) What should their selling price be in order to maximize their revenue? c) How many tickets will be sold at this pointarrow_forward
- Explain: Q) In the manager-employee game (work-shirk), why manager and employee would play a mixed strategy? What happens if one of them plays a pure strategy? Solve this but not copy pastearrow_forwardTeletronics reported record profits of $100,000 last year and is on track to exceed those profits this year. Teletronics competes in a very competitive market where many of the firms are merging in an attempt to gain competitive advantages. Currently, the company’s top manager is compensated with a fixed salary that does not include any performance bonuses. Explain why this manager might nonetheless have a strong incentive to maximize the firm’s profitsarrow_forwardSuppose that Lionel Messi is negotiating a contract with FC Barcelona. Messi has an offer from Real Madrid for $20 million a year. If he signs with FC Barcelona, they will earn $90 million in revenue from the signing. FC Barcelona's next best option is to sign Cristiano Ronaldo. They would earn $70 million from signing Ronaldo and would pay him a contract of $10 million. Messi's bargaining power is w = 1/2. a) What is the negotiated salary between Messi and FC Barcelona under Nash Bargaining? What is Messi's surplus and what is FC Barcelona's surplus? b) Due to an injury, FC Barcelona would only earn $50 million from signing Ronaldo but everything else remains the same. What is the negotiated salary between Messi and FC Barcelona under Nash Bargaining? What is Messi's surplus and what is FC Barcelona's surplus?arrow_forward
- Explain the following In the manager-employee game (work-shirk), why manager and employee would play a mixed strategy? What happens if one of them plays a pure strategy? In two player’s dynamic games the player who moves second gets the advantage because we solve the game backwards. Explain why or why not? In dynamic game theory, a situation where a player is using non-credible threat is an examples of subgame perfect Nash equilibrium, explain why or why not?arrow_forwardEconomics Present an example of a prisoner's dilemma in your own life. Describe the “cooperative" action for each player that involves trusting the other in some sense. Explain why mutual cooperation will lead to an outcome that is preferred to mutual defection. Describe why there is an incentive for each to defect, or not cooperate, or not be trustworthy. Discuss what might be done to promote mutual cooperation, or what is done.arrow_forwardThe 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?arrow_forward
- Examples of tradeoffs that have both monetary and non monetary costarrow_forwardCompany A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices. The payoff matrix shows the profits of the companies in millions based on their possible actions.. Company A Increase Price Company B Increase Price Maintain Price $50, $40 Maintain Price $55, $45 $35, $30 $60, $35 The government offers a $5 million subsidy to maintain current pricing. What is the expected outcome of the new payoff matrix, given the subsidy? The Nash equilibrium changes, and both companies will maintain their prices The Nash equilibrium changes, and both companies will increase their prices. The Nash equilibrium remains the same, and both companies will increase their prices Company A will increase its price, while Company B maintains its price. Company A will maintain its price, while Company B increases its pricearrow_forwardProblem 2 A local girls soccer team decides to sell chocolate bars to raise some money for new uniforms. The girls are to receive 10% of all the sales they make. Once the bars arrive the girls see that they have to sell each bar for $2.50. They think this price is too high. Are the girls being altruistic or is there something else going on? (Assume the girls face a downward sloping demand curve). Iarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education