Management in a small company has recently realized a $100,000 increase in profits. This has occurred after two years of poor economic performance due to expensive storm damage in two of its facilities. It needs to stabilize its costs and conserve some of the funds for future shortfalls. It has designated $30,000 for labor in this year’s budget. This represents a 5% increase in the hourly wage for employees. If it delays the development of two technology upgrades, it could provide an 8% wage increase but customers might then gravitate to a competitor. Managers will receive an 8% salary increase plus bonuses of 10%.

The union was able to avoid a wage concession in the last two years, but employees did not have an increase. During that time, the industry standard for wage increases was 3%. This year it is 5%. The election of union officers occurs next year. This year the union hopes to secure a 10% hourly wage increase without losing any other financial benefits. It estimates that it could get a 6% increase ratified but anything less would not be supported.

The ZOPA is:

a) 0 – 10%

b) 5 – 10%

c) 6 – 8%

d) 5 – 8%

In a distributive strategy, if the union makes the opening proposal, its initial offer should be:

a) 20%

b) 15%

c) 12%

d) 10%

In a distributive strategy, if the company opens the negotiation with an initial offer of 0%, the union should counter-propose:

a) 20%

b) 15%

c) 12%

d) 10%

After several discussions, both parties offer their target points.If the parties use the equality norm on that combination, the agreement will be:

a) 9%

b) 7.5%

c) 7%

d) 5.5%

The union’s BATNA would be used if an impasse occurred at:

a) 5%

b) 6%

c) 7%

d) 8%