# Negotiation: Risk and Condor

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Negotiation: Risk and Condor
Jewels Equipment Manufactures
1.
a. In negotiation with condor, what is Jewels BATNA?

A. Jewels BATNA in this case is to buy Z1 CPU from Beta, because Z1 are more effective than Z2 and they will save \$5 per unit so the total cost of this Z1 units at the end instead of being \$38 will be \$33. This is \$2 dollars cheaper than buying Z2 at \$35 per unit.

b. In negotiation with condor, what is Jewel’s reservation price, i.e., the most it will pay for Condor’s Z2 CPU?

B. Their reservation price should be something less than \$33 dollars per unit, so they can save more money per unit at the end of the production.

Now assume that although Beta’s price is firm, your purchasing manager believes that there is a 50% chance that she might be able to negotiate a 20% reduction from Acme (to \$28 per unit)

c. How has Jewel’s BATNA changed?

C. Well, now that they have that 50% chance of reduction they have like a double BATNA, because they can try to get that 20% reduction from acme to get the CPU in \$28 dollars per unit and if that does not work they still can go with Beta.

d. What is Jewel’s new reservation price, i.e., the most it will pay for Condor’s Z2 CPU? Assume that Jewels makes decisions on the basis of Expected Monetary Value (EMV)

D. Well we have. (\$35*50%) + (\$28*50%) = \$31.5 so their reservation price should be \$31.5. no more than that.

Condor’s largest customer, 40% of Condor’s sales, recently declared bankruptcy. As a result, Condor has an excess supply of Z2 CPU. If Condor is unable to sell its supply of Z2 CPU to Jewel, Condor estimates that there is a 20% chance that they will be able to sell the CPU to one of Jewel’s competitor for \$30 per CPU and an 80% chance that they will have to liquidate their stock for \$15 per CPU.

e. What is Condor’s BATNA?

E. Their BATNA will be to sell the CPU to Jewel’s competitor or to liquidate their stock.

f. What is Condor’s reservation price? Assume that Condor makes decisions on the basis of EMV

F. Well we have.

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