6. Bargaining (15 points)

Paul and Sue have been working jobs that pay $50,000 and $100,000/year, respectively. They are deciding whether to quit their jobs and open new venture, which may make $200,000.

a. Using Nash's nonstrategic view of bargaining, show and explain the terms of the agreement.

b. Paul says it is only fair to split the $200,000 evenly. If you were Sue, what would you say and why?

c. Suppose Sue is reluctant to reach agreement and open the new venture. What two things could Paul do to help his bargaining position and get Sue to quit her job and open the new business?