Suppose that Alex wants to purchase a boat from Rosette. Alex is willing to pay up to$18,000, while Rosette is not willing to accept any offer below $15,000. Assume that there are a finite number of negotiating rounds.
If the discount factors for Rosette and Alex are dR=0.05 and dA=0.05,respectively, how much should Alex offer for the boat?
Suppose that Rosette’s discount factor is dR= 0.20, and Alex’s discount factor is dA=0.15.
How much should Alex offer for the boat? How does this offer differ from your r to part a, and why?

Answer rating: 100% (QA)

Impatience can be symmetric and asymmetric Under symmetric impatience the discount factor is same Th... View the full answer