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.
-Suppose the shopkeeper is known to usher low bidders out of the store even if it means giving up the sale.If the customer moves first,he would
A)Offer the high price
B)Offer the low price
C)Get ushered out of the store
D)All of the above

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.
-​Suppose the shopkeeper is known to usher low bidders out of the store even if it means giving up the sale.If the customer moves first,he would
A)​Offer the high price
B)Offer the low price
C)Get ushered out of the store
D)​All of the above

Quizplus · Accepted Answer

Given the customer values the item at $60 and the shopkeeper is known to usher low bidders out, the customer, moving first, would offer the high price ($50) to ensure a successful transaction and avoid being ushered out. This choice maximizes the customer's utility by securing the item for less than their valuation of it.

Use the Following Setup