How much is m the potential gain from trade

Reference no: EM131485465

Question: 1. Two people are bargaining over a used car. The buyer is willing to pay a maximum price of $8,500. The seller will not sell the car for a price less than $8,000.

a. How much is M, the potential gain from trade?

b. How much are the buyer and the seller's disagreement values, a and b?

c. Suppose the seller moves first and knows the maximum value the buyer attaches to the car (perfect information assumption). Then how much would the seller offer to sell the car?

d. What happens if the buyer moves first?

Reference no: EM131485465

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