It is March and Ozzie wants to purchase Harriet's season tickets to Boston Red Sox games. Ozzie is a member of "Red Sox Nation" and can hardly wait to get his hands on Harriet's season tickets. Ozzie is willing to pay up to $4,000. Failure to come to an agreement will reduce Ozzie's gain by 80 percent. Although Harriet likes baseball, she would rather go to the movies. The season tickets were a gift from here good-for-nothing son-in law. Be that as it may, the minimum amount that Harriet will accept for the tickets is $3,000. Failure to come to an agreement will reduce Harriet's gain by 5 percent. If there is no limit on the number of bargaining rounds, how much should Ozzie offer Harriet?
A) An amount between $3,950 and $4,000
B) An amount between $3,600 and $3,650
C) An amount between $3,575 and $3,625
D) An amount between $3,525 and $3,575
E) An amount between $3,400 and $3,450

Question

Quizplus · Accepted Answer

The correct answer is A because Ozzie's maximum offer is $4,000 and Harriet's minimum offer is $3,000. The midpoint between these two values is $3,500. Ozzie's gain is reduced by 80% if he does not reach an agreement, so he should offer Harriet an amount that is at least 80% of his maximum offer, which is $3,200. Harriet's gain is reduced by 5% if she does not reach an agreement, so she should accept an offer that is at least 95% of her minimum offer, which is $2,850. Therefore, the range of acceptable offers is between $3,200 and $2,850, which is between $3,950 and $4,000.

It Is March and Ozzie Wants to Purchase Harriet's Season