You can put questions about the homework as comments to this post. Note that there is extensive discussion in this homework that precedes the login part. Also note that while the math of the complete information part is not that hard, the math of the incomplete information part is much more difficult. So what I expect you to get out of the incomplete information part is to see the results, but not to be able to derive them. Of course, if you are mathematically inclined, go for it.

One other word about interpreting the model as it pertains to realistic bargaining situations you are apt to encounter in the near future, such as bargaining with a potential future employer about salary. With the latter there is a market. Yhe bargaining happens because you as a job candidate are not a perfect substitute for somebody else who might fill the position and the job you are bargaining about is not a perfect substitute for other possible jobs you might take. There is no bargaining in the perfect substitutes case. The market entirely determines the price in that case. The bargaining happens in the imperfect substitutes case, which leaves wiggle room for some negotiation.

You can interpret the model as focusing on only the wiggle room. Alternatively, it is about the buying and selling of a one-off thing, like a piece of art work.

My hw says that c<v when c=.295 and v=.195, which is obviously wrong. What should I do.

ReplyDeleteCan you take a screen shot of that and email it to me. I don't believe there is any error in that sheet.

ReplyDeletefor the complete information how would we get the price. I got the other two parts right but im kind of stuck on this.

ReplyDeleteThe price is the midpoint between (or average) of the cost and the value.

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