Exam 15: Bargaining and Negotiation

Discuss the differences between one-shot bargaining situations and repeated situations.Will the situations produce different bargaining strategies? Explain why or why not.

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Question 1

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In one-time negotiation between a pair of interested parties,the parties' bargaining behavior is solely motivated by the immediate profit available from an agreement.However,in repeated negotiations,a party recognizes that its behavior in the current set of negotiations can influence the expectations of its future bargaining partners.In a one-time bargaining setting,in contrast,the firm's actions are motivated solely by immediate profit;issues of reputation do not enter.The repeated bargaining relationship has a disciplining role which indicates a party's credible threat to punish the other with retaliatory responses.In short,bargaining partners that are "married" to each other have obvious incentives to maintain a cooperative relationship.

An agent is said to be risk averse only if he assesses:

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Question 2

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The _____ is the line that joins all the combinations of buyer's profit and seller's profit at all possible prices within the zone of agreement.

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Question 3

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An efficient quantity-price agreement is achieved by:

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Question 4

The prospect for a mutually beneficial agreement between a large and a small firm is affected by all of the following except:

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Question 5

Determine the value-maximizing order quantity when the buyer's total value from purchasing Q units of output is B = 30Q - Q2‚ and the seller's cost of producing Q units is C = 0.5Q2.

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Question 6

When each party makes a single offer to divide profits,an equilibrium is reached only if:

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Question 7

A bilateral monopoly refers to a market situation in which:

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Question 8

Why might legislators often end up reversing their political position on an issue by voting in favor of a bill when previously they had spoken out against it?

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Question 9

In recent years,the U.S.government has often negotiated cost-plus contracts (CPC)with defense firms developing new weapons systems.Under a CPC,the government reimburses the contractor for the total costs it incurs.Frequently,the result is cost overruns in development.Why might this occur? How might an alternative contract structure remedy this problem? Could this contract solution cause a new problem?

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Question 10

A movie producer is negotiating with an up-coming director to direct its next summer action film.The director's latest movie has been well-received and there is talk that he might be nominated for an academy award.The producer believes the director is currently worth a $500,000 fee but would be worth a $2 million fee if he is nominated for an Oscar (these are the producer's reservation prices).For his part,the director's current walk-away price is $300,000 but it would rise to $1.5 million with an Oscar nomination.The producer thinks the chance of a nomination is 0.3;the director thinks it is 0.6. (a)Can the parties agree on a flat dollar fee? If so,what is the zone of agreement?

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Question 11

Frequently,bargaining impasses lead to prolonged and costly strikes.If we assume that the negotiators are rational decision makers,how can this occur?

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Question 12

The expected value of litigation for both firms A and B both is $300,000 in favor of Firm A.The court costs for A and B are $50,000 and $75,000,respectively. (a)Determine the range of out-of-court settlements for Firms A and B.

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Question 13

Total trading gains available in a negotiation are high if:

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Question 14

Contractor A is negotiating to build a warehouse for Firm B to be completed in 75 days.Contractor A's estimated cost is $200,000.Pushing forward the completion date by 15 days would allow it to reduce its cost by $30,000.The value to Firm B of the warehouse is $250,000 if completed in 75 days and $235,000 if completed in 90 days.A mutually beneficial,efficient deal:

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Question 15

Which of the following is true of repeated negotiations between two firms?

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Question 16

Briefly summarize how bargaining can be simultaneously cooperative and competitive.

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Question 17

How do bargaining strategies differ between multiple-issue negotiations and single-issue negotiations?

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Question 18

What determines whether or not a company will settle out of court when sued for a faulty product? How might the company react differently if other agents might sue it in the future? Explain.

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Question 19

The expected value of litigation for both firms A and B both is $500,000 in favor of Firm A.The court costs for A and B are $60,000 and $100,000,respectively.Calculate the collective benefit that can be obtained if both firms agree to an out-of-court settlement.

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Question 20

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Discuss the differences between one-shot bargaining situations and repeated situations.Will the situations produce different bargaining strategies? Explain why or why not.

An agent is said to be risk averse only if he assesses:

The _____ is the line that joins all the combinations of buyer's profit and seller's profit at all possible prices within the zone of agreement.

An efficient quantity-price agreement is achieved by:

The prospect for a mutually beneficial agreement between a large and a small firm is affected by all of the following except:

Determine the value-maximizing order quantity when the buyer's total value from purchasing Q units of output is B = 30Q - Q2‚ and the seller's cost of producing Q units is C = 0.5Q2.

When each party makes a single offer to divide profits,an equilibrium is reached only if:

A bilateral monopoly refers to a market situation in which:

Why might legislators often end up reversing their political position on an issue by voting in favor of a bill when previously they had spoken out against it?

Frequently,bargaining impasses lead to prolonged and costly strikes.If we assume that the negotiators are rational decision makers,how can this occur?

The expected value of litigation for both firms A and B both is $300,000 in favor of Firm A.The court costs for A and B are $50,000 and $75,000,respectively. (a)Determine the range of out-of-court settlements for Firms A and B.

Total trading gains available in a negotiation are high if:

Which of the following is true of repeated negotiations between two firms?

Briefly summarize how bargaining can be simultaneously cooperative and competitive.

How do bargaining strategies differ between multiple-issue negotiations and single-issue negotiations?

What determines whether or not a company will settle out of court when sued for a faulty product? How might the company react differently if other agents might sue it in the future? Explain.

The expected value of litigation for both firms A and B both is $500,000 in favor of Firm A.The court costs for A and B are $60,000 and $100,000,respectively.Calculate the collective benefit that can be obtained if both firms agree to an out-of-court settlement.

Introduction to Economic Decision Making

Optimal Decisions Using Marginal Analysis

Demand Analysis and Optimal Pricing

Estimating and Forecasting Demand

Production

Cost Analysis

Perfect Competition

Monopoly

Oligopoly

Game Theory and Competitive Strategy

Regulation, Public Goods, and Benefit-Cost Analysis

Decision Making Under Uncertainty

The Value of Information

Asymmetric Information and Organizational Design

Auctions and Competitive Bidding

Linear Programming

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