Question

Refer to the normal-form game of bargaining shown below.

Union |
Management | |||

$0 | $250 | $500 | ||

$0 | ($0, $0) | ($0, $250) | ($0, $500) | |

$250 | ($250, $0) | ($250, $250) | (-$10, -$10) | |

$500 | ($500, $0) | (-$10, -$10) | (-$10, -$10) |

Suppose that management and the union are bargaining over how much
of a $500 surplus to give to the union. It is assumed that the
surplus can only be split into $250 increments. Furthermore,
negotiations are set up such that management and the union must
simultaneously and independently write down the amount of surplus
to allocate to the union. The payoff structure to this one-shot
bargaining game is listed in Figure 10-16. The number of efficient
outcomes resulting from the bargaining game is:

Answer #1

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