Homework Week 6 - Conner - BUS5421 Managerial Economics...

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BUS5421 Managerial EconomicsHomework Week 1Stephen ConnerAugust 1, 2016Problem 15-4 Salary NegotiationThe below figure represents the potential outcomes of your first salary negotiation after graduation. Assuming this is a sequential-move game with the employer moving first, indicate the most likely outcome. Does the ability to move first give the employer an advantage? If so, how? As the employee, is there anything you could do to realize a higher payoff?Assuming that the employer moves first, we would expect him/her to put out a low offer. This would put the employee in the position of either walking or taking the offer. Since the value of walking is 0 to both parties, the employee will accept the offer with the employee getting 75 and the employer getting 100.By the employer going first, it allows them to make the low offer, eliminating the high offer branch of thedecision tree. This gives the employee really only two options, to walk or to take the lower offer.

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