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MID- TERM ANSWER SET Q.1 a) \$33 (2 points). Z1 and Z2 are functionally identical. Z1=Z2+5. Jewel is a buyer; and its fallback is from Beta which sells Z1s for \$38, which is equivalent to buying Z2s at \$33. b) 33 (2 points). Never pay more than BATNA. c) NO, still \$33 (2 points). BATNA has not changed since certain fall back position is still \$33. d) RP=.5*28+.5*33 = \$30.5 (2 points) e) \$15. Condor knows that it can liquidate stock at \$15 (2 points) f) RP = 20% *30 + 80%*15 = 18 (2 points) g) will accept any answer that states range from d to f in this case \$18-\$30.5 (2 points) h) RP is now \$15 (2 points) . Condor is risk averse and prefers the sure shot of liquidating for \$15 over prospecting for a 20% of selling to Jewel competitors. i) By losing track of one’s BATNA, one risks leaving money on the table by having a RP that is worse than one’s BATNA. (2 points) j) yes, when you are doing multiple deals and trying to build goodwill in this deal to capture value in the next. (2 points)

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