h = 0.5 (probability for major problem/treatment)
v = 10 (value of sufficient treatment)
cl = 2 (costs of minor treatment for seller)
ch = 6 (costs of major treatment for seller)
p Î {1, …, 11}, with ph ≥ pl
(feasible prices for seller)
o = 1.6 (outside-option for both parties if customer chooses out)
Given the game that was played in the experiment (i.e. h=0.5, v=10, cl = 2, ch = 6), what would be the payoffs to two players, if player 1 (the seller) posts price pl = 6 and ph = 8, player 2 (the customer) accepts if
neither liability nor verifiability applies (scenario B/N), player 2 needs high quality, player 1 provides low quality and charges ph.
only verifiability applies (scenario B/V), player 2 needs low quality, player 1 provides high quality (which price will his charge for in this case and why?).
only liability applies (scenario B/L), player 2 needs high quality, player 1 provides high quality (would he/she have a choice?) and charges for low quality?
liability and verifiability apply (scenario B/LV), player 2 needs low quality, player 1 provides low quality (would he/she have a choice?) and charges for low quality (again, would he/she have a choice?).
For all questions a-d: which part of the decisions would not be in line with standard economic theory?