Management and a Labor Union Are Bargaining Over How Much

question 92

Multiple Choice

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?

• A) Management requests $50 and the labor union accepts $0.
• B) Management requests $35 and the labor union accepts $10.
• C) Management requests $20 and the labor union accepts $20.
• D) Management requests $25 and the labor union accepts $10.

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Definitions:

Cash-Generating Units

The smallest identifiable group of assets that generates cash inflows independently of other assets or groups of assets.

Business Combination

A transaction or event in which a buyer obtains control of one or more businesses.

Goodwill

An intangible asset reflecting the premium paid over the fair market value of assets during an acquisition, attributed to the company's brand, customer relations, and reputation.

IFRS

International Financial Reporting Standards, which are a set of accounting principles that govern financial reporting and are designed to be globally consistent.