B.2 Manipulating Alternatives to No Agreement Question 2: Home Depot and Target can either hire a gardener to maintain their own store, with Target hiring Alfred and Home Depot hiring Bart, or they can hire Charlie to maintain both stores. For each of the five months when college kids are out of school (April, May, June, July, and August), Alfred would charge $400 per month to maintain Target only and Bart would charge $600 per month to maintain Home Depot only; or Charlie would maintain both stores for a total of $700 per month. In late March, Target confronts Home Depot over how much the two stores should pay to hire Charlie to maintain both stores. Home Depot either accepts that offer for each of the five months, or rejects it and returns in late April with a counteroffer. In late April, Target either accepts that counteroffer for each of the remaining four months, or rejects it and returns in late May with a counteroffer. In late May, Home Depot either accepts that counteroffer for each of the remaining three months, or rejects it and returns in late June with a counteroffer. In late June, Target 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, Home Depot either accepts that counteroffer for the remaining month, or rejects it and the bargaining game is over. What percentage of the gains from an agreement should Target offer? How much should Target offer to pay for Charlie to maintain both stores? Should Home Depot accept that initial offer?

Now suppose that, in early March, Alfred's brother makes a take-it-or- leave-it offer to Target to maintain Target for $250 per month. Re-compute

Target's offer to pay for Charlie to maintain both stores. Answer to Question: