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Critiquing the 'Rational Actor' Assumption in Bargaining
A classical economic model of a simple bargaining game assumes that a person offered any amount of money greater than zero will always accept it, based on the logic that 'something is better than nothing.' Critique this assumption. Explain why this model often fails to predict real-world outcomes by discussing how a player's unknown personal values can create uncertainty for their opponent.
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Economics
Economy
Introduction to Microeconomics Course
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CORE Econ
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
Evaluation in Bloom's Taxonomy
The Economy 2.0 Microeconomics @ CORE Econ
Cognitive Psychology
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Uncertainty in a Simple Bargaining Game
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Critiquing the 'Rational Actor' Assumption in Bargaining
A city council is negotiating with a company to build a new factory. The council's goal is to secure the factory by offering the smallest tax incentive package the company will accept. The council knows the company is also considering two other cities. The council is uncertain about the precise value the company places on this city's unique skilled workforce compared to the lower operating costs offered by the other locations. Given this uncertainty about the company's preferences, which of the following negotiating strategies is most justifiable for the city council?
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