Refer to the Normal-Form Game of Bargaining Shown Below Suppose That Management and the Union Are Bargaining Over How

question 117

Multiple Choice

Refer to the normal-form game of bargaining shown below. $\begin{array}{l}\quad\quad\quad\quad\quad\quad\text { Management }\\\text { Union }\begin{array}{|l|l|l|l|} \hline & \$ 0 & \$ 250 & \$ 500 \\\hline \$ 0 & (\$ 0, \$ 0) & (\$ 0, \$ 250) & (\$ 0, \$ 500) \\\hline \$ 250 & (\$ 250, \$ 0) & (\$ 250, \$ 250) & (-\$ 10,-\$ 10) \\\hline \$ 500 & (\$ 500, \$ 0) & (-\$ 10,-\$ 10) & (-\$ 10,-\$ 10) \\\hline\end{array}\end{array}$ 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 Figure 10-16.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:

Reasonable People

Individuals who exercise average care, skill, and judgment in conduct and who are presumed to have a certain level of knowledge when making decisions.

Ethical Dimension

Pertains to the moral aspects or implications of a situation, decision, or action.

Swindle

A deceptive act or operation designed to cheat or defraud someone.

Employer

An individual or organization that hires and pays people to perform specific jobs.