Home Depot and Lowes can hire a gardener to maintain a common area for $110 for each of the three summer months (June, July, August). Each month that the common area is maintained, Home Depot expects to gain $100 more profit and Lowes $50 more profit.
Before June, Home Depot confronts Lowes over its share of the maintenance cost. Home Depot presents its offer. Lowes either accepts it for each of the three months, or rejects it and returns in late June with a counteroffer. In late June, Home Depot either accepts that counteroffer for each of the remaining two months, or rejects it and returns in late July with a counteroffer. In late July, Lowes either accepts that counteroffer for the remaining month, or rejects it and the bargaining game is over.
What percentage of the gains from trade should Home Depot offer? How much should Home Depot offer to pay? Should Lowes accept that initial offer?