lower) they’re running the risk of losing $5 million dollars for each firm. If the
entrant enters and threatens to fight he/she could possibly deter the incumbent,
which could result in doubling from $5 million to $10 million. The entrant must be
convincing in order for this to work. The entrant is better off with the ability to
withdraw if he/she wants to. However, the best option still is to fight.
You’ve entered into a contract to purchase a new house, and the closing is scheduled
for next week. It’s typical for some last-minute bargaining to occur at the closing
table, where sellers often try to tack on extra fees. You have three options for the
closing: (1) attend yourself, (2) send an attorney authorized to close only per the
previously negotiated terms, or (3) pre-sign all the closing documents per the
current terms and not attend the closing. Which of these would be most
advantageous from a bargaining position?