When each party makes a single offer to divide profits, an equilibrium is reached only if:
A) the individual profits add up to less than 100% of the total profit.
B) each party gets an equal share.
C) the individual profits add up to more than 100% of the total profit.
D) the sum of the individual profits is equal to the total profit.
E) an increase in share of a party does not reduce the share of the other party.

Question

Quizplus · Accepted Answer

For an equilibrium to be reached, the sum of the individual profits has to equal the total profit. If the individual profits add up to less than 100% of the total profit, there is room for negotiation and a new offer could be made. If they add up to more than 100%, then there is not enough profit to divide between the parties. If each party gets an equal share, it is a special case of the sum of individual profits being divided equally. If an increase in share of a party reduces the share of the other party, then there is no incentive to agree on any offer as it is a zero-sum game.

When Each Party Makes a Single Offer to Divide Profits