Suppose That Management and the Union Are Bargaining Over How

question 90

Multiple Choice

Suppose that management and the union are bargaining over how much of a $500 surplus to give to the union.It is assumed that the surplus can only be split into $250 increments.Furthermore, negotiations are set up such that management and the union must simultaneously and independently write down the amount of surplus to allocate to the union.The payoff structure to this one-shot bargaining game is listed in the above payoff matrix.Find the Nash equilibrium(ia) to this game.

• A)Union write down $0 and Management write down $500.
• B)Union write down $250 and Management write down $250.
• C)Union write down $500 and Management write down $0.
• D)All of the statements associated with this question constitute Nash equilibria.

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Definitions:

Marginal Social Benefit

The additional benefit received by society as a whole from consuming one more unit of a good or service.

Public Good

A good or service offered to every member of a community free of charge, supplied either by the government or a non-profit private entity.

Excludable

A characteristic of a good or service that allows owners or producers to prevent its use by people who have not paid for it.

Nonpayers

Individuals who benefit from a good or service without contributing to its cost, often associated with public goods.