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In the above RHS expression, we know that the numerator is smaller than the denominator, so the fraction is less than 1. We know that <math>N>1</math>, so the inequality always holds.
===Question B2: Relationship Specific Investments===
First some clarification of my interpretation of the problem.
Timing:
1. Buyer makes investment, costing <math>x^2</math>.
2. Buyer observes <math>v</math>
3. Seller makes take-it-or-leave-it (TOILI) offer <i>without</i> seeing <math>v</math>.
4. Buyer accepts or rejects.
Utility functions: The problem does not make reference to utility functions. I will assume that the buyer's utility is <math>x+v-P</math> where <math>P</math> refers to the price of the widget -- if the buyer chooses to buy. Otherwise his utility is zero. As for the seller: I will assume his utility is simply <math>P</math> (the price of the widget) if it is sold, and otherwise is zero. Note that both agents are risk neutral in this setup.
(a)
(b)
(c)
===Question C1: Agenda Control and Status Quo===
