The unit price in a ________ optimal contract can vary anywhere between the two limiting prices, the higher of which would give all the joint profit to the manufacturer and the lower of which would give all the joint profit to the distributor. The tendency in this situation is to split the joint profit evenly between the buyer and the seller.

Question

Quizplus · Accepted Answer

The concept described in the statement is known as Pareto optimal contract, where the unit price can vary between two limiting prices and the joint profit is split evenly between the buyer and the seller. The given statement does not mention any connection with any of the other options, such as Palmer, Martin, or Nash. Therefore, option C (Pareto) is the best choice.

The Unit Price in a ________ Optimal Contract Can Vary