Part one.

You attempt to hire Fred to work on a project that will yield $700 in revenue if it succeeds and $100 if it fails. If Fred exerts great effort, his opportunity cost of working is $210. If Fred works little effort, his opportunity cost of working is $150. If Fred exerts great effort, the project will succeed with probability 0.6. If Fred exerts little effort, the project will succeed with probability 0.3. You must design a contract for Fred such that Fred gets paid "x" if the project succeeds and "y" if the project fails, so that Fred takes the contract and gives great effort.

(a) Calculate Fred's expected value of giving great effort in terms of "x" and "y." Make sure to include the cost of Fred's effort in your answer.

(b) Now, calculate Fred's expected value of giving little effort in terms of "x" and "y." Again, make sure to include the cost of Fred's effort in your answer.

(c) If Fred takes the contract, it must induce Fred to give great effort instead of little effort. Given this information, what is the minimum value of "x ? y"?

(d) You must now convince Fred that taking the contract is better than not taking the contract. (The expected value to Fred of not taking the contract is zero.) Determine the values of "x" and "y" that would make Fred indifferent between taking the job and giving great effort, taking the job and giving little effort, and not taking the job at all.

Part two

confidential Role Information for Scott

You have been working for Nishi High School in Japan as a member of their English teaching staff for the past 6 months. Previous to this position, you taught a year at the Naka High School but changed schools because you thought Nishi High provided more of a challenge. You are one of two foreign teachers on the Nishi staff although you have been working in Japan longer than the other teacher. You have a degree in English literature and this is your first job after graduating from university in the United States.

This is the first time that you have ever been to Japan. Previous to your living there, you had never studied Japanese nor knew anything about the Japanese culture. You applied for and accepted a teaching job in Japan because you heard that the pay was higher than starting positions back home in the United States, in spite of the higher cost of living. You are trying your best to adapt to the Japanese way of life. You are currently attending Japanese classes and have read everything you can get your hands on about the Japanese culture so that you don't make any major faux pas on the job.

You feel that your relationship with the teaching staff at Nishi has been very cordial for the short time that you have been there. Japanese people are extremely group oriented and it usually takes time to break into the inner circle, as your experiences at Naka High confirm. The teachers at Nishi seem to appreciate the extra hours you put into work and your efforts to speak Japanese. Your relationship is also helped by the fact that you are on good terms with Mr. Honda, the head of English at Nishi. You have known Mr. Honda for over a year since he also taught at Naka High School and transferred to Nishi high about the same time as you. At Naka High School, you had assisted Mr. Honda with several projects and teaching seminars, which you felt were very successful. Another reason that you feel explains your acceptance by the teachers is that 3 months ago, Nishi High School hosted a prefecture wide English Teaching conference at which you gave a demonstration teaching class. The demonstration was a huge success and resulted in Nishi receiving an outstanding commendation from the prefectural Board of Education and from each of the other schools in attendance. To show his gratitude and his faith in your abilities, Mr. Honda has put you in charge of the Advanced English program. This is a special cram class for the senior students who are studying for their university entrance examination. This exam is extremely tough and important as only those students with the highest scores have any hope of being accepted to the top universities. To be trusted with this class shows that the teachers and Mr. Honda think highly of you as a teacher.

One afternoon about two weeks ago, you were working at your desk in the staff room when you were approached by a group of smiling Japanese English teachers headed by Mr. Honda. The teachers put a copy of 500 English Sentences on your desk. You feared that they were going to ask you to make more use of this textbook in your classes since you are the only teacher in the department who does not use the book. You know that the book was written several years ago by senior English teachers of Nishi high school who since have been promoted to higher positions at the Board of Education and that the book has gone on to be used by virtually every

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English department in the prefecture, but you also know that the text is full of glaring grammatical inconsistencies, misspelling and archaic forms of English. You would never use such an inferior textbook in your classes. What you find most appalling about the book is that it is endorsed by an American English teacher who you think must be the worst if not the stupidest teacher alive for promoting such an abysmal text.

To your relief, the entourage of teachers are there to ask for your input to correct and update the 500 English Sentences for a revised edition planned to be published soon. Mr. Honda tells you that Nishi High School has the great honor of being assigned the task of editing the text and submitting it to the publisher in time for the deadline. You agree to do the work and ask Mr. Honda when he would like you to finish the revisions. He tells you that the corrected manuscript must be on the publisher's desk in 10 days. You find this an unreasonably short amount of time for such a big project. You don't believe that you will have enough time to do the work and ask why the publisher has given the school such a quick deadline. Mr. Honda tells you that he has known about the project for at least six months. You ask Mr. Honda why he did not come to you sooner, but your question is greeted with coughs and silence. You decide that it is probably better that you don't know the reason since you will probably not be happy with the answer, and tell Mr. Honda that you will go ahead with the project.

You take the project home with you and work on it for 4 days non-stop. You return the manuscript all covered with red marks, sample replacement sentences and complete explanations as to why the changes you made were necessary. To your surprise, instead of thanking you for your efforts, Mr. Honda looks very uncomfortable, smiles nervously and takes the manuscript from you.

Two days later, while sitting at your desk, the same group of English teachers approach you, thank you for all your hard work, and then while coughing and humming and hawing, tell you that your corrections cannot be used. You cannot believe what they are telling you. You demand to know why and they tell you that it would be too much trouble for the publisher to make so many changes at such a late date. You stare at the group of teachers incredulously and tell them that maybe they should have thought of this six months ago. As the teachers retreat, you wonder which is more important to them, the publisher or students?

The next day, Mr. Honda comes over to your desk. In his hand is the uncorrected manuscript that he is going to send in to the publisher along with an endorsement paper that he has prepared and wants you to sign. You cannot believe this. Not only are they going to send in the text without any of your corrections, but they want you to endorse it. You realize that you have no power to force Mr. Honda to send the manuscript with your corrections into the publisher, but you can control whether you sign the endorsement or not. You have read the last endorsement in the previous edition and you have openly made fun of the foreign teacher who signed his name to such a flawed textbook. There is no way that you want your name associated with such a substandard text and you feel that your integrity and reputation as an educator would be compromised if you sign

1. explain and rank the issues

2. Explain and list your interests

3. Determine your positions (Target/Aspiration Price, Reservation Price, BATNA and first offer price)

4. Determine and list the potential interests and positions of the other side based on the information you have

5. List out your negotiation protocol (this can be communicated to the other side when you set up your negotiation.

C...

1. Below is a graph portraying the market (inverse) demand curve, marginal revenue curve, and cost curves: MCM PM Then monopolist's equilibrium level of output is 10 and the monopolist prot at equilibrium is 100. 2. We are studying the competitive market for beer, a rm faces the cost curve C(y) = 3y2 + y + 27. If the market price is 5 the rm will enter the market