Answered step by step
Verified Expert Solution
Question
1 Approved Answer
13. Imagine the following situation. You are trying to sell a guitar. You listed the guitar on Craigslist at a price of $1,000 abo month
13. Imagine the following situation. You are trying to sell a guitar. You listed the guitar on Craigslist at a price of $1,000 abo month ago. You just heard from somebody that they are interested in negotiating with the phone for the guitar. You need to decide what your reservation value for this nego should be. Consider the following 3 scenarios for your best option if you do not reach agreement person. Assume you are risk neutral. Assume that you assign no cost to your time (oth when mentioned explicitly in the scenarios). Scenario A: You can immediately give the guitar to your brother who has agreed to pa $650. 13A. Reservation price under Scenario A: Scenario B: You can leave the guitar on Craigslist. If you do this, you think there is a 10 you get a full price offer within the next month and a 20% chance that you get a non- negotiable offer of $750. There is a 70% chance that you get no more offers and that up selling to your brother for $650. No matter what happens, if you choose this option spend extra time and hassle worth, say, -$50 to you. (The option in Scenario A is also a to you.) 13B. Reservation price under Scenario B
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started