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.
-Would the shopkeeper be able to convince the customer that he would usher the customer out if he gets a low price?
A)Yes,such threats are always credible
B)No,because losing the sale is not in the shopkeeper's best interest
C)No,because he would get more by accommodating the low price than losing the sale
D)Both B&C

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.
-​Would the shopkeeper be able to convince the customer that he would usher the customer out if he gets a low price?
A)​Yes,such threats are always credible
B)No,because losing the sale is not in the shopkeeper's best interest
C)No,because he would get more by accommodating the low price than losing the sale
D)​Both B&C

Quizplus · Accepted Answer

The shopkeeper would not credibly threaten to usher the customer out for a low price because doing so would result in a loss of sale, which is not in the shopkeeper's best interest. Additionally, accepting the low price still yields a sale, which is preferable to getting nothing at all.

Use the Following Setup