Ok, as a point of game theory you’ve convinced me. As a matter of human psychology, I think A has B over a barrel, although possibly not a half-million-dollar barrel. Although A gets nothing if B refuses to buy, A is not the one who wants a specific, very valuable change in the starting situation. B is the one who wants the status quo changed in a specific way; he has, so to speak, the burden of proof.
Although both parties have an opportunity cost from not making a deal, it seems to me that the opportunity cost “I don’t get to do these specific things I had planned on” will weigh more heavily in a human mind than “I don’t get some amount of free money, which may be small”.
As a matter of psychology, the two are neighbors. They probably work it out amiably, and A probably doesn’t end up charging much because it doesn’t cost him anything, and because B will get really, really angry if A insists on some high price. Also, practically, if B is so inclined, he can punish A by litigating the issue—it’ll cost A money and is just an unpleasant experience. It’ll cost B the same, but we know that real people are willing to pay money to punish those they find uncooperative.
If these were two competing businesses, or if involved business more generally, I wouldn’t be surprised if A did try to take advantage of his position. But the actual fact is that humans are not homo economicus, and will generally not bend other people over a barrel in such situations. If the costs to A were higher, it’d be a very different story.
Or perhaps I have an overly optimistic view of average human behaviour.
Ok, as a point of game theory you’ve convinced me. As a matter of human psychology, I think A has B over a barrel, although possibly not a half-million-dollar barrel. Although A gets nothing if B refuses to buy, A is not the one who wants a specific, very valuable change in the starting situation. B is the one who wants the status quo changed in a specific way; he has, so to speak, the burden of proof.
Although both parties have an opportunity cost from not making a deal, it seems to me that the opportunity cost “I don’t get to do these specific things I had planned on” will weigh more heavily in a human mind than “I don’t get some amount of free money, which may be small”.
As a matter of psychology, the two are neighbors. They probably work it out amiably, and A probably doesn’t end up charging much because it doesn’t cost him anything, and because B will get really, really angry if A insists on some high price. Also, practically, if B is so inclined, he can punish A by litigating the issue—it’ll cost A money and is just an unpleasant experience. It’ll cost B the same, but we know that real people are willing to pay money to punish those they find uncooperative.
If these were two competing businesses, or if involved business more generally, I wouldn’t be surprised if A did try to take advantage of his position. But the actual fact is that humans are not homo economicus, and will generally not bend other people over a barrel in such situations. If the costs to A were higher, it’d be a very different story.
Or perhaps I have an overly optimistic view of average human behaviour.