Suppose that you are a manager. You are considering whether or not to monitor employees with the payoffs in the normal-form game shown below. Management and a labor union are bargaining over how much of a $50 surplus to give to the union. The $50 is divisible up to one cent. The players have one shot to reach an agreement. Management has the ability to announce what it wants first, and then the labor union can accept or reject the offer. Both players get zero if the total amounts asked for exceed $50. If you were the labor union, which type of "rules of play" would you prefer to divide the $50 surplus?
A) One-shot, simultaneous-move game
B) One-shot, sequential-move game with management as the first mover
C) One-shot, sequential-move game with labor union as the first mover
D) One-shot, simultaneous-move game and one-shot, sequential-move game with management as the first mover

Question

Suppose that you are a manager. You are considering whether or not to monitor employees with the payoffs in the normal-form game shown below.  Management and a labor union are bargaining over how much of a $50 surplus to give to the union. The $50 is divisible up to one cent. The players have one shot to reach an agreement. Management has the ability to announce what it wants first, and then the labor union can accept or reject the offer. Both players get zero if the total amounts asked for exceed $50. If you were the labor union, which type of "rules of play" would you prefer to divide the $50 surplus?
A) One-shot, simultaneous-move game 
B) One-shot, sequential-move game with management as the first mover 
C) One-shot, sequential-move game with labor union as the first mover 
D) One-shot, simultaneous-move game and one-shot, sequential-move game with management as the first mover

Quizplus · Accepted Answer

The labor union would prefer a sequential-move game with themselves as the first mover since they can set a relatively high demand initially and negotiate to a position that is closer to their favorable outcome. In this case, management does not have the opportunity to announce a lower demand than what the labor union would expect. Therefore, the union has more bargaining power and can negotiate for a better outcome.

Suppose That You Are a Manager