Chapter 15
15-4 Salary Negotiation
The below figure represents the potential outcomes of your first salary negotiation after
graduation. Assuming this is a sequential-move game with the employer moving first, indicate the
most likely outcome. Does the ability to move first give the employer the advantage? If so, how?
As the employee, is there anything you can do to realize a higher payoff?
Answer:
Having the ability to move first does give the employer the advantage. A Nash equilibrium is a pair of
strategies, one for each player, in which each strategy is a best response to the other (p.186). The
players in this question are Employee and Employer with a game taking turns called sequential-
move.
Employer makes first move:
Low salary offer
Employee walks (Employer gets 0, Employee gets 0)
Employee accepts (Employer gets 100, Employee gets 75)
Higher salary offer
Employee walks (Employer gets 0, Employee gets 0)
Employee accepts (Employer gets 75, Employee gets 100)
Given the sequential-move game with employer moving first, this does give the employer an
advantage. It allows the employer to start the salary offer at the lower amount given that most
likely the employee will accept. But there is the possibility that the employee can realize a higher
15-4 Salary Negotiation
The below figure represents the potential outcomes of your first salary negotiation after
graduation. Assuming this is a sequential-move game with the employer moving first, indicate the
most likely outcome. Does the ability to move first give the employer the advantage? If so, how?
As the employee, is there anything you can do to realize a higher payoff?
Answer:
Having the ability to move first does give the employer the advantage. A Nash equilibrium is a pair of
strategies, one for each player, in which each strategy is a best response to the other (p.186). The
players in this question are Employee and Employer with a game taking turns called sequential-
move.
Employer makes first move:
Low salary offer
Employee walks (Employer gets 0, Employee gets 0)
Employee accepts (Employer gets 100, Employee gets 75)
Higher salary offer
Employee walks (Employer gets 0, Employee gets 0)
Employee accepts (Employer gets 75, Employee gets 100)
Given the sequential-move game with employer moving first, this does give the employer an
advantage. It allows the employer to start the salary offer at the lower amount given that most
likely the employee will accept. But there is the possibility that the employee can realize a higher
