Question Number Q1:

In repeated negotiations between two firms

A Option A: The reputation of a firm does not play a significant role

B Option B: There is enhanced scope for purely opportunistic behavior by firms

C Option C: The firm with less bargaining power is positioned to receive a greater share of the profit

D Option D: The bargaining behavior of the firms is motivated solely by the immediate profit available from an agreement

E Option E: Firms have extra incentives to maintain a cooperative relationship

Question Number Q2:

Under imperfect information, bargainers

A Option A: may miss some efficient agreements due to self-interested strategic behavior

B Option B: can never reach an efficient agreement

C Option C: will have an interest in revealing their true values at the outset of negotiations

D Option D: typically have sufficient incentives to fulfill the terms of the agreement

E Option E: typically start with moderate and compatible demands

Question Number Q3:

If both parties have perfect information about all economic facts of the negotiation

A Option A: any mutually-beneficial profit split can be supported as an efficient outcome

B Option B: the parties are sure to reach an equitable agreement

C Option C: a 50-50 profit split is the sole equilibrium outcome

D Option D: the parties should reach an efficient agreement

E Option E: a price offered by one party is most likely to fall beyond the zone of agreement

Question NumberQ 4:
When each party makes a single offer to divide profits, an equilibrium is reached only if

A Option A: the individual profits add up to more than 100% of the total profit

B Option B: each party gets an equal share

C Option C: an increase in share of a party does not reduce the share of the other party

D Option D: the sum of the individual profits is equal to the total profit

E Option E: the individual profits add up to less than 100% of the total profit

Q 5:

An efficient quantity-price agreement is achieved by

A Option A: finding a point where the seller's marginal cost is equal to zero

B Option B: finding a point of tangency between buyer and seller profit contours

C Option C: minimizing the supplier's average cost per unit

D Option D: finding the buyer's value-maximizing quantity

E Option E: supplying the maximum quantity that the buyer demands

Question NumberQ 6:

In multiple-issue negotiations where monetary compensation is available

A Option A: there is less opportunity for mutual gain than when a single issue is at stake

B Option B: efficiency cannot be attained by merely increasing the total value the parties derive from the negotiation

C Option C: a new issue should be adopted if it increases the benefit to any one of the parties, even at the expense of the other

D Option D: a new issue should be adopted only if the benefit to one side exceeds the cost to the other

E Option E: a new issue should be adopted only if both sides directly benefit

Question NumberQ 7:

Contractor A is negotiating to build a warehouse for Firm B to be completed in 75 days. Contractor A's estimated cost is $200,000. Pushing back the completion date by 15 days would allow it to reduce its cost by $30,000. The value to Firm B of the warehouse is $250,000 if completed in 75 days and $235,000 if completed in 90 days. A mutually beneficial, efficient deal

A Option A: means completion of the warehouse construction in 90 days at a price greater than $235,000

B Option B: is possible only if contractor A agrees to build the warehouse in 75 days

C Option C: means completion of the warehouse construction in 90 days at a price between $170,000 and $235,000

D Option D: means completion of the warehouse construction in 75 days at a price between $200,000 and $250,000

E Option E: is not possible as there is no zone of agreement

Question NumberQ 8:

The optimal response to an uncertain negotiation is risk sharing if

A Option A: one party is risk averse and the other is risk neutral.

B Option B: both parties are risk averse.

C Option C: both parties are risk lovers.

D Option D: one party is a risk lover and the other is risk neutral.

E Option E: both parties are risk neutral.

Q 9:

An out-of-court settlement in a dispute is mutually beneficial if the

A Option A: difference between the parties' court costs is smaller than the difference between their expected values from litigation

B Option B: sum of the parties' court costs is greater than the difference between their expected values from litigation

C Option C: difference between the parties' court costs is greater than the difference between their expected values from litigation

D Option D: sum of the parties' court costs is greater than the sum of their expected values from litigation

E Option E: sum of the parties' court costs is smaller than the difference between their expected values from litigation

Question NumberQ 10:
If the expected litigation value for each firm for a case is $275,000 and the court costs for the firms are $55,000 and $30,000 respectively, then the size of the zone of a mutually beneficial agreement is

A Option A: $25,000

B Option B: $220,000

C Option C: $85,000

D Option D: $75,000

E Option E: $245,000

Question NumberQ 11:

Total trading gains available in a negotiation are high if

A Option A: the seller's value is significantly lower than the buyer's value

B Option B: the traded commodity has multiple uses

C Option C: the final price of the traded commodity exceeds the buyer's walk-away price

D Option D: the trading parties have strong negotiating skills

E Option E: the traded commodity has a large number of substitutes

Question NumberQ 12:

The outcome of a negotiated agreement is deemed efficient only if

A Option A: no other agreement makes one party better off without making the other worse off

B Option B: both parties benefit from the agreement (relative to their walk-away options)

C Option C: the agreement equitably balances both sides' interests

D Option D: neither the buyer nor the seller receives more than 60% of the total surplus

E Option E: the sum of the buyer's and seller's profit shares is less than 100%

Q 13:

Given buyer and seller walk-away prices of $40,000 and $60,000, respectively

A Option A: the size of the zone of agreement is $20,000

B Option B: the seller can earn a maximum profit of $10,000

C Option C: a zone of agreement does not exist

D Option D: the size of the zone of agreement is $100,000

E Option E: the buyer can enjoy a maximum surplus of $10,000

Question NumberQ 14:

How do differences in probability assessments cause firms to assess different values for a transaction?

Question NumberQ 15:

A faulty gasket on a piece of machinery supplied by Firm Z caused a fluid leak that damaged equipment in Factory X. Determine the range of out-of-court settlements when the expected value of litigation for the two firms is $65,000 in favor of Factory X. The court costs for Firm Z are $20,000; the costs for Factory X are $25,000.