Suppose That You Are a Manager

question 62

Multiple Choice

Suppose that you are a manager. You are considering whether or not to monitor employees with the payoffs in the normal-form game shown below. 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 perfect equilibrium?

• A) Management requests $49.99, and the labor union accepts $0.01.
• B) Management requests $25, and the labor union accepts $25.
• C) Management requests $0, and the labor union accepts $50.
• D) None of the answers is correct.