use the following setup
Consider a sequential game between a shopkeeper and a haggling customer.The party who moves first chooses either a high price ($50)or low price ($20)and the second mover either agrees to the price or walks away from the deal and neither party gets anything.Ignore costs and assume the customer values the item at $60.
-Looking ahead to how the shopkeeper is more likely to respond what price should the customer more likely to quote?
A)High price
B)Low price
C)Let the shopkeeper quote the price
D)A compromised price between the high and the low

Question

use the following setup
Consider a sequential game between a shopkeeper and a haggling customer.The party who moves first chooses either a high price ($50)or low price ($20)and the second mover either agrees to the price or walks away from the deal and neither party gets anything.Ignore costs and assume the customer values the item at $60.
-​Looking ahead to how the shopkeeper is more likely to respond what price should the customer more likely to quote?
A)​High price
B)Low price
C)Let the shopkeeper quote the price
D)​A compromised price between the high and the low

Quizplus · Accepted Answer

The customer should quote a low price because if the shopkeeper moves first and quotes a high price, the customer can simply walk away without any consequences as they do not have to pay anything. However, if the customer moves first and quotes a low price, the shopkeeper may still accept the offer and the customer might get the item for a lower amount than its actual value. Therefore, the customer has more to gain by quoting a low price.

Use the Following Setup