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What offer should a make to maximize its expected profit

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Reference no: EM13880203

Firms A and B are negotiating to conclude a business deal worth $200,000 in total value to the parties. At issue is how this total value will be split. Firm A knows B will agree to a 50-50 split, but it also has thought about claiming a greater share by making a take-it-or-leave-it offer. Firm A judges that firm B would accept a 45 percent share with probability .9, a 40 percent share with probability .85, and a 35 percent share with probability .8. What offer should A make to maximize its expected profit?

Reference no: EM13880203

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