Consider a sequential game between a shopkeeper and a haggling customer. The party who moves first chooses either a high price ($50) or low price ($20) and the second mover either agrees to the price or walks away from the deal and neither party gets anything. Ignore costs and assume the customer values the item at $60. If the shopkeeper goes first and quotes a high price, what is the best response of the customer? a. Swear off shopping forever b. Accept the high price c. Walk away from the deal d. Yell at the store owner

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MrRoyal MrRoyal · Answer 1 · 2020-03-05T07:44:26+01:00

Answer:

Accept the high price

Explanation:

Since the customer values the item at $60.

And the shopkeeper quoted a high price at $50.

The high price quoted by the shopkeeper is ($60 - $50) $10 less than the customer estimated value of the item.

He may decide to walk away from the deal but that's not the best option because the quoted price is not up to his estimated price.

So, the best to do at that point is to accept the high price of the item at $50