watson-bargaining-chapter-exercises

# watson-bargaining-chapter-exercises - Bargaining Problems...

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Bargaining Problems ich simplifies to I = 17,000. (We get the same result by looking at Rose- ry's payoff.) In the end, the standard bargaining solution predicts that Jerry I Rosemary will agree to put him in charge of both the drama courses and softball team (x = 1) and pay him a salary of I = 17,000. This leads to payoff!t1 = 24,000 for Jerry and !til = 28,000 for Rosemary. In a general bargaining problem, one can compute the standard bargaining ution by using the following procedure. First, calculate the maximized joint ue v* [by determining the value of x that maximizes VI (x)+v,(x)]. Second, e that player i obtains the payoff (I, +][i (v* - d l - d,), where d i is player i 's ault payoff. Third, find the transfer I that achieves this split of the surplus. ERCISES Calculate the standard bargaining solution for the following variations of the Jerry-Rosemary example in this chapter. In each case, graph the bargaining set, find the maximized joint value, determine the players' individual values, and compute the transfer
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