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, what percentage of the bargaining surplus should Harriet receive?

Question

Quizplus · Accepted Answer

Harriet should receive around 94 percent of the bargaining surplus. The bargaining surplus is the difference between Ozzie's maximum willingness to pay ($4,000) and Harriet's minimum acceptance amount ($3,000), which is $1,000. Ozzie's loss from not reaching an agreement is 80% of his gain, while Harriet's loss is only 5% of her gain. This disparity in their respective losses from not reaching an agreement gives Harriet a stronger bargaining position, leading to her receiving a larger portion of the surplus.

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