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The labor union and management of a particular company have

The labor union and management of a particular company have been negotiating a new labor contract. H… Show more The labor union and management of a particular company have been negotiating a new labor contract. However, negotiations have now come to an impasse, with management making a “final” offer of a wage increase of $1.10 per hour and the union making a “final” demand of a $1.60 per hour increase. Therefore, both sides have agreed to let an impartial arbitrator set the wage in- crease somewhere between $1.10 and $1.60 per hour (inclusively). The arbitrator has asked each side to submit to her a confi- dential proposal for a fair and economically reasonable wage in- crease (rounded to the nearest dime). From past experience, both sides know that this arbitrator normally accepts the proposal of the side that gives the most from its final figure. If neither side changes its final figure, or if they both give in the same amount, then the arbitrator normally compromises halfway between ($1.35 in this case). Each side now needs to determine what wage increase to propose for its own maximum advantage. Formulate this problem as a two-person, zero-sum game. • Show less

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