Explain in terms of real life option value.

Do home improvements increase house value? Suppose there are two otherwise identical houses, except that one with a newly finished basement worth $50k and the other one's basement is unfinished. You learned that the house without finished basement has just being sold for $250k, and now the other one is asking for $300k. While you don't have to have a basement, you really like that finished basement. Do you think the $300k price is fair?

Car dealers trick: When negotiating the price for a car, the dealer often asks you to write your desired price down and sign your name on a piece of paper. Why