Beanie wishes 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 gain by 3 percent and reduces 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 gain reduction is 3% and Cecil's is 7%. The ratio of Cecil's reduction to the total reduction (3% + 7%) is 7/10, which means Beanie should receive 1 - 7/10 = 3/10 or 30% of the surplus. However, due to the continuous bargaining rounds, Beanie's share increases to around 69%.

Beanie Wishes to Purchase Cecil's House