CAN YOU ANSWER THE FOLLOWING QUESTIONS BELOW

For reference:

Introduction:

Nash bargaining.There is one final application of the theory of static games that will be considered, consisting of a simple bargaining game. Bargaining games can take many forms, and some other forms will be considered later in the chapter, but the situation examined now is one where a sum of money is available to be shared between management and a labor union. The example is presented, first, to illustrate the application of game theory to the theory of the firm, and, second, to illustrate the primary importance of dominant and dominated strategies compared with Nash equilibrium.

Bargaining (Simultaneous Game)

• Management and labor are bargaining over a fixed sum of $200 million
• Two possible strategies available to each player: "bargain hard" or "accommodate"

-If both bargain hard, no deal is reached

-If both accommodate, then they split the gains from trade.

-If one player bargains hard and the other accommodates, then the player who bargains hard takes 75% of the "pie"

Management Bargain Hard Accommodate Bargain Hard O 150 Labor Accommodate 50 150 100 , 100Management low offer generous offer Union strike accept strike accept 150 , 50 O 50 , 150Management low offer generous offer Union strike strike accept 50 , 150