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 at how the customer is more likely to react,what price should the shopkeeper charge?
A)High price
B)Low price
C)Offer the good for free
D)A compromised price between the high and the low price

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 at how the customer is more likely to react,what price should the shopkeeper charge?
A)​High price
B)Low price
C)Offer the good for free
D)​A compromised price between the high and the low price

Quizplus · Accepted Answer

Since the customer values the item at $60, they are willing to pay up to that amount. By choosing a high price of $50, the shopkeeper ensures a sale, as the customer perceives the item as worth more than the asking price, leading to a successful transaction.

Use the Following Setup