Assignment:
1. Suppose you receive an outside offer of employment that provides a substantial raise over your current salary. According to our textbook, the outside offer should improve your bargaining position with your current employer. However, your supervisor may also decide not to bargain and leave you to remain in your current job without a raise or to take the outside offer. So, we can view this bargaining relationship with your employer as a repeated game that takes another turn whenever you receive another outside opportunity. What do the principles about repeated games and bargaining that we have studied in this class imply for your approach to managing this relationship?
2. For the product or service your team developed for Residency Project 1, please devise a price discrimination scheme intended to increase total sales revenue. Some groups considered price discrimination during their presentations, so your response to this question should offer another form of price discrimination for this product. In particular, you should describe the type of price discrimination to be used as well as the types of customers who will pay higher or lower prices. As well, you should consider the potential for resale among customers. Please note that this is NOT a group project -- you should conduct this analysis by yourself and provide your own response to the question.
3. If you sell items on ebay.com, you can conduct a traditional auction that lasts a specified amount of time, and the highest bid at the closing time is the winner. Alternatively, you can post a set purchase price for the item, and any buyer who is willing to pay that price can avoid the auction and purchase the item immediately. In order to attain the highest price from an auctioned item, what have we learned from the material in our textbook? In particular, what are the trade-offs associated with including the immediate purchase option? How should you decide what the immediate purchase price should be for this auction?
4. For the market or industry you wrote about Starbucks, please describe a situation in which adverse selection or moral hazard arises in this business. Then, you should describe the way that this asymmetric information problem is commonly resolved in this market.