ch18_solutions_solved edit

ch18_solutions_solved edit - Solutions to Chapter 18...

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Solutions to Chapter 18 Exercises SOLVED EXERCISES S1. The father and daughter were implicitly negotiating about how much freedom from parental control she would have. The father’s BATNA was low: breakdown of negotiation would lead to a tantrum or a scene that would ruin his evening with old friends immediately and for sure. The daughter’s BATNA was better: she risked punishment that might be more distant in time and also uncertain because her mother might intervene, or the issue would become moot as she grew older. So she got the better deal out of the bargaining. S2. The idea is to lower the other side’s BATNA much more than your own. Workers’ salaries are roughly constant (although there may be some variable element due to overtime, bonuses, and so on). Employers’ profits vary much more. Therefore: 1. Delivery drivers should threaten to strike in the two to three weeks before Christmas. 2. Power station workers should threaten to strike during the coldest, darkest days of winter, or in areas where air-conditioning is common, the hottest days of the summer. In Britain, power workers struck in the winter of 1979 and brought down the government. Actually this cost them dearly, because that brought Margaret Thatcher’s conservative government to power. She cleverly manipulated them into striking during the summer of 1985. Air conditioning was not an issue in Britain. The union lost the strike and was effectively destroyed. S3. The businessman’s BATNA is probably quite low; holding onto the domain name may be worth very little to him. Owning the domain name, which makes it easier for people to find the Alta Vista site, is important to Compaq, so its BATNA is also, apparently, millions below the value of a negotiated agreement. Compaq is probably quite impatient to make a deal. There are many firms in the “portal” market, but many of them may not survive. Winners and losers may be determined quickly, perhaps
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This note was uploaded on 08/08/2011 for the course ECON 171 taught by Professor Charness,g during the Spring '08 term at UCSB.

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ch18_solutions_solved edit - Solutions to Chapter 18...

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