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After graduation, you enter salary negotiations for your first job. Suppose the potential employer (employer A) has two choices: to offer you a high salary or to offer you a low salary. You may then accept or reject whatever offer is made. The payoffs, as well as the decision tree, are depicted in the following figure.

Problems: Chapters '15 and 16 II N Em ployee Accept Em ployee: El? Em ployer A: 59 Employee Reject Employee: 0 Employer A: (I Em ployee Accept Em ployee: 59 Em ployer A: Q? Employee Reject Employee: 0 Employer A: (I Assume this is a sequential game. If employer A offers a low salary, you, as the employee, are best served by V the offer. In this case. you would earn a payoff of V , and employer A would earn a payoff of V . Alternatively, if employer A offers a high salary, you are best served by v the offer. In this case, you would earn a payoff of V , and employer A would earn a payoff of V . lwith this information, employer A will choose to make a V offer, since it will yield a higher payoff for her, based on what you (the employee) will subsequently choose. Suppose you have a competing job offer from employer B. Accepting this job offer gives a payoff of 3'8. During your negotiations with employee A, you have the option of taking this offer from employer B, and employer A is aware of this offer (as well as the payoff to you), Given this\\ op'lpe 'ng offer, .LRCtl'v'aIE v y Ill 0' ' 'S the negotiation wi'd'1 employer A is depicted in the following gure: , _ . . I40 :0 bet: "lugs :0 ac: vaie "Ico