Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 20, Problem 5QAP
To determine

The disturbing factor of the movie scene.

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Why do economic agents always respond to incentives
Two players play the Ultimatum Game, in which they are to split $20.  A purely rational agent would only reject an offer of …
Styles In an auction, potential buyers compete for a good by submitting bids. Adam Gallinsky, a social scientist from NWU, compared eBay auctions in which the same good was sold. He found on average that, the higher the number of bidders the higher the sales price. For example, in two separate auctions of identical IPods, the one with the higher number of bidders brought the higher sales price. According to Gallinsky, this explains why smart sellers set absurdly low opening prices (the lowest price the seller will accept), such as 1 cent for a new IPod. Use the concept of consumer and producer surplus to explain this reasoning.
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