Use the Following Setup

question 69

Multiple Choice

use the following setup
Consider a sequential game between a shopkeeper and a haggling customer.The party who moves first chooses either a high price ($50) or low price ($20) and the second mover either agrees to the price or walks away from the deal and neither party gets anything.Ignore costs and assume the customer values the item at $60.
-​Would the shopkeeper be able to convince the customer that he would usher the customer out if he gets a low price?

• A)​Yes,such threats are always credible
• B)No,because losing the sale is not in the shopkeeper's best interest
• C)No,because he would get more by accommodating the low price than losing the sale
• D)​Both B&C

---

Definitions:

Implicit Marginal Tax Rate

The rate at which future benefits decrease as an individual’s income increases due to the phasing out of assistance or benefits.

Marginal Income Tax Rate

The rate at which the last dollar of a person's income is taxed, reflecting the incremental tax paid on incremental income.

Explicit Benefit-reduction Rate

The specified rate at which benefits decrease as income or other factors change, often related to welfare policies.

Incidence of Poverty

The proportion or rate of a population living below the poverty line, indicating the extent of poverty in a given area.