Author Question: In a bargaining solution, a player's net surplus is A) the amount of total surplus minus any ... (Read 137 times)

savannahhooper · **on:** Jul 1, 2018

In a bargaining solution, a player's net surplus is

A) the amount of total surplus minus any deadweight loss.
B) the difference between what the player receives in the final bargain minus what she would have gotten from the disagreement point.
C) the amount of consumer surplus she receives minus any deadweight loss.
D) always maximized.

Question 2

How can a firm be made better off by limiting its options?

What will be an ideal response?

spencer.martell · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

B

Answer to Question 2

By limiting its options, the firm commits to a certain strategy. The strategy is now viewed as credible by potential competitors. For example, an oversized plant commits the firm to a large level of output. Its threat to overproduce in the face of entry is now viewed as credible.