Supply & Demand

Willingness to Settle

Mateo has been injured on the job and Cloud 9 is hoping to pay him enough so that he doesn’t sue the company. The problem? Mateo is undocumented and can’t accept the payment because he doesn’t have a social security number. Jeff (the regional manager) doesn’t know the reason and assumes that Mateo is just holding out for more money.

When it comes to buying things (in this case, Mateo’s right to sue), people rarely share their willingness to pay from the beginning. In an effort to earn some consumer surplus, people try to get things for less than they’re willing to pay.