The appropriate game model changes depending upon whether these neighbors are on adjacent or opposite sides of the river. The important questions here are to consider the dilemmas which arise in these models as well as the impact various legal regimes may have on the utilities assigned to various outcomes and the resulting Nash equilibria. If you've finally found a buyer for the old Dodge in the driveway, you still have to agree on a price. If your price is too high, the buyer will walk away, but if the buyer's offer is too low, you'll ask the buyer to leave. Since you both want to make a deal, you'll bargain.
Bargaining is an essential aspect of economic theory.
In this chapter, the authors consider a model for a general bargaining problem and apply it to bargaining situations where the buyer and seller exhibit various degrees impatience. They introduce the basic economic terminology of bargaining and apply a game tree analysis. The important questions here are to understand the bargaining problem from an economic standpoint and to use game theory to understand which deals will be made. In this chapter the authors use game trees and game tables to analyze the profits for each dealer for different choices of pricing strategies. The important questions here are to understand how the assumption of rationality will lead to equilibrium strategies for each dealer.