Austin is going on a holiday with his infant daughter and has a first-class ticket. He...

Austin is going on a holiday with his infant daughter and has a first-class ticket. He bought the first- class ticket for $500. The coach ticket sold for $200. A person has a seat adjacent to Austin and is considering offering to pay Austin to move to one of the empty seats in coach,

a) The person seating next to Austin values a quiet flight at $750. Can Austin and this person reach a

mutually agreeable price for Austin to move to coach? Explain and indicate if such price exists.

b) If instead the person seating next to Austin values a quiet flight at $200, can Austin and this person reach a mutually agreeable price for Austin to move to coach? Explain and indicate if such price

exists.

c) Assuming efficient bargaining, for what range of the person seating next to Austin value of quiet

will Austin move to coach?

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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