Management and a labor union are bargaining over how much of a$50 surplus to give...

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 NOT a Nash equilibrium?

Group of answer choices

Management requests $50 and the labor union accepts $0.

Management requests $30 and the labor union accepts $10.

Management requests $25 and the labor union accepts $25.

Neither management requesting $50 and the labor union accepting $0 nor management requesting $30 and the labor union accepting $10 are Nash equilibria.

Expert Solution

B is right option.

the reason behind it is that when management request 30 labour union has the option of accepting $20 as it would not want to leave the rest of the award unspent

similarly A is not nash equilibrium because union doesn't ger anything by accepting $0 when management request $50 it can ask for a higher amount and ensure that management would have to ensure that some amount is shared with the Union

So A and C is right option

Rahul Sunny answered 2 years ago

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