Beanie wants to purchase Cecil's house. The most that Beanie is willing to pay is $300,000. The least that Cecil is willing to accept is $250,000. Suppose that any failure to reach an agreement reduces Beanie's and Cecil's gain by 7 percent. If there is no limit to the number of bargaining rounds, what percentage of the bargaining surplus should Beanie receive?

Question

Quizplus · Accepted Answer

Beanie's maximum willingness to pay is $300,000, and Cecil's minimum acceptable price is $250,000, creating a bargaining surplus of $50,000. With a 7% reduction in gains for each failed negotiation round, Beanie should aim to secure a larger portion of the surplus to minimize potential losses. The Nash bargaining solution suggests that Beanie should receive around 48% of the surplus to balance the negotiation power and potential loss.

Beanie Wants to Purchase Cecil's House