Consider the wage negotiations between Cricket Australia (CA) and the union that represents the players. CA can make either a High or Low wage offer. The Union sees the offer and then can Accept or Reject. If the Union Accepts a High offer the payoffs are 25 to CA and 75 to the Union. If the Union rejects a High offer from CA, the payoffs are 5 and 25 to CA and the Union respectively. If the Union Accepts a Low offer from CA, the payoffs are 80 to CA and 20 to the Union. Finally, if the Union Rejects a Low offer, the payoffs are 5 and 30 to CA and the union, respectively. What is the (credible) outcome of this bargaining scenario?Group of answer choicesCA offers a High wage and the union Accepts.CA offers a Low wage and the union RejectsCA offers either High or Low wage and the union RejectsCA offers a High wage and the union RejectsCA offers a Low wage and the union Accepts
Question
Consider the wage negotiations between Cricket Australia (CA) and the union that represents the players. CA can make either a High or Low wage offer. The Union sees the offer and then can Accept or Reject. If the Union Accepts a High offer the payoffs are 25 to CA and 75 to the Union. If the Union rejects a High offer from CA, the payoffs are 5 and 25 to CA and the Union respectively. If the Union Accepts a Low offer from CA, the payoffs are 80 to CA and 20 to the Union. Finally, if the Union Rejects a Low offer, the payoffs are 5 and 30 to CA and the union, respectively. What is the (credible) outcome of this bargaining scenario?Group of answer choicesCA offers a High wage and the union Accepts.CA offers a Low wage and the union RejectsCA offers either High or Low wage and the union RejectsCA offers a High wage and the union RejectsCA offers a Low wage and the union Accepts
Solution
The credible outcome of this bargaining scenario is that CA offers a High wage and the union Accepts.
Here's why:
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If CA offers a High wage, the payoffs are 25 to CA and 75 to the Union if the Union accepts. If the Union rejects, the payoffs are 5 to CA and 25 to the Union. The Union would prefer to accept the High wage offer because 75 > 25.
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If CA offers a Low wage, the payoffs are 80 to CA and 20 to the Union if the Union accepts. If the Union rejects, the payoffs are 5 to CA and 30 to the Union. The Union would prefer to reject the Low wage offer because 30 > 20.
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From CA's perspective, offering a High wage results in a payoff of 25 if the Union accepts, and 5 if the Union rejects. Offering a Low wage results in a payoff of 80 if the Union accepts, and 5 if the Union rejects. Given that the Union would reject a Low wage offer, CA is better off offering a High wage because 25 > 5.
Therefore, the most credible outcome is that CA offers a High wage and the Union accepts.
Similar Questions
Cricket Australia and the players’ union are in negotiations over the players’ wage for the upcoming Ashes tour. The negotiations are as follows. CA makes an offer of a wage w to the union. The union sees this offer and must decide to either accept or reject it. If it accepts the offer, the payoffs are 300 – w for CA, and w for the players’ union. If the union rejects, bargaining moves to a second round, in which the union makes a wage offer w2, which then CA must either accept or reject. If CA accepts the offer of w2, CA gets a payoff of 300 - w2, and the union gets w2. If CA rejects the offer w2, both parties get 0. Which of the following is a possible outcome as a credible equilibria?Group of answer choicesCA offers a wage w = 0, the union rejects and counters with an offer of w2 = 200, and CA accepts.CA offers a wage w = 0, and the union accepts.CA offers a wage w = 300 and the union accepts.CA offers a wage 0, and the union rejects and counters with an offer of 299, and CA accepts.CA offers a wage of 300, the union rejects and counters with an offer of w2 = 299 and CA accepts.
Consider the wage negotiations between Cricket Australia (CA) and the union that represents the players. Assume that Cricket Australia and the union are bargaining over how much of a $200 surplus will be split. Suppose that CA moves first and makes an offer p. The union (U) may accept or reject the offer. If the offer is rejected neither party gets anything. If the offer is accepted the Union gets p and the CA gets 200 - p. How much better off or worse off would it be for CA if U moves firsts and makes an offer p which would give CA a payoff of p and U a payoff of 200 – p if the offer is accepted and a payoff of 0 to each party otherwise? Assume that the possible offers to be made are $1, $100 or $199.
Consider the bargain between Cricket Australia (CA) and the players’ union. The two parties are in a negotiation over the players’ wage w, which proceeds as follows: the union makes a wage offer of w to CA; following this, CA sees the offer and can accept or reject. If CA accepts the offer, CA gets a payoff of 200 – w, where w is the wages paid to the players and union gets a payoff of w. If CA rejects the wage offer, each party gets 0.What is the outcome of the bargaining game?Group of answer choicesThe union offers CA pays a wage w = 10 and CA rejects.The union offers CA pays a wage w = 200 and CA accepts.The union offers CA pays a wage w = 0 and CA accepts.The union offers that CA pays a wage w = 100 and CA accepts.None of the above
Consider the wage negotiations between Cricket Australia (CA) and the union that represents the players. Assume that CA and the union are bargaining over how much of a $100 surplus will be split. Suppose than CA moves first and makes an offer. The union (U) may accept or reject the offer. If the offer is rejected neither party gets anything. If the offer is accepted the Union gets the amount offered and the CA gets the remaining residual. What is the (credible) outcome of this bargaining scenario?Group of answer choicesCA offers $1 and the Union rejects.CA offers $99 and the Union accepts.CA offers $50 and the Union rejects.CA offers $1 and the Union accepts.CA offers $50 and the Union accepts.
In economics, a game consists of:Group of answer choicesPayoffsRulesPlayersAll of the aboveA cricket bat, ball and a pitch of 22 yards.
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