Problem set 3 answers

Problem set 3 answers - PPS 55D Spring 2008 Problem Set#3...

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PPS 55D: Spring 2008 Problem Set #3 - ANSWERS 1. Cheap Car Talk You are considering buying a used car from Al’s Better’n New Used Cars. By now you’ve narrowed your choices to a 94 Toyota Celica at Al’s or two other vehicles: a ‘95 Camry which you don’t really like as much as the Celica and which you could get for $8000 and a ’93 Miata which you like as much as the Celica and which you could get for $7200. a. What is your reservation price? $7200 b. Al paid $6000 for the car and put another $1500 in repairs into it. So far, however, he has not been able to sell the car. He only has one other possible buyer, who seems likely to offer $6500. What is his reservation price? $6500 c. Indicate the ZOPA, if any, in this bargain. d. Al seems very friendly. “I’ll gladly match any other deal,” he says. “How much are they asking at the other dealers?” Should you tell him or not? Why? No, by giving away your reservation value, you facilitate his ability to commit
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This homework help was uploaded on 04/22/2008 for the course PUB POL 55 taught by Professor Vigdor during the Spring '08 term at Duke.

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Problem set 3 answers - PPS 55D Spring 2008 Problem Set#3...

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