Reference no: EM133064355

1) Consider bargaining in which each party increases its outside option by $10,000. Which of the 2) following is a likely result?

a. the chance of a deal increases.

b. each party's share of the bargaining surplus increases by $10,000.

c. the bargaining split remains the same.

d. each party's share of the bargaining surplus increases by $5,000.

Pete and Lisa are entering into a bargaining situation in which Pete stands to gain up to $5,000 and Lisa stands to gain up to $1,000, provided they reach agreement. Who is likely to have the stronger bargaining position, all else equal?

a. Pete

b. Lisa

c. They will be equally effective

d. These potential gains will have no impact on bargaining

3)Two hospitals are bargaining with an insurance company to get into its provider network. The insurance company can earn $100 if it puts one of the hospitals in its network and $200 if it puts both hospitals in its network. If both hospitals merge and bargain jointly, how much more will they earn relative to not merging?

a. $0

b. $50

c. $100

d. $200

4) George and KC have been working jobs that pay $50,000 and $30,000 per year, respectively. They are trying to decide whether to quit their jobs and jointly open up a taco stand on the beach, which they estimate can earn $150,000 per year. Based on the information in the question, will they quit their jobs? If so, why will they quit their jobs and how will the taco stand proceeds by split? If not, why not?