Jessie Jumpshot Full Information

1
Jessie JumpshotFull Information

• It is still hard to find all of the options.
• Need to really understand how the other side sees
  the world
• Engaged in joint problem solving
• I call it Getting to Know

2
Jessie Jumpshot

• Package Sal Merch Profits Bonus
• A 2.5 0 0
• B 2 0 1.5
• C 1.5 10 0.5
• D 1.2 5 0
• E 1 10 1

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Jessie Jumpshot

• Package Sal Merch Bonus
• Profits
• B 2 0 1.5
• C 1.5 10 0.5
• B is easy to figure out. 1.5 bonus is worth 0.9
  to Jessie, costs Sharks 0.15
• What is value of merchandise profits?
• Case doesnt state chance of winning absent
  Jessie (assume 0)
• Jessie 0.6 Win 10 Sharks 0.1 Win 12
• 8 3
• 0.4 Lose 5 0.9 Lose 2

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Jessie Jumpshot

• Pkg Sal Merch Bonus Jess / Sharks
• Profits
• A 2.5 0 0 2.5 2.5
• B 2 0 1.5 2.9 2.15
• C 1.5 10 0.5 2.6 1.85
• D 1.2 5 0 1.6 1.35
• E 1 10 1 2.4 1.4
• Case C 2.6 1.5 10(8) .3 1.85 1.5
  10(3) .05
• Case D 1.6 1.2 5(8) 1.35 1.2 5 (3)
• Case E 2.4 1 10(8) .6 1.4 1 10(3)
  .1

5
Jessie Jumpshot

• Pkg Sal Merch Bonus Jess / Sharks BATNAs
• Profits
• A 2.5 0 0 2.5 (2.5) 2.1 / (3)
• B 2 0 1.5 2.9 (2.15)
• C 1.5 10 0.5 2.6 (1.85)
• D 1.2 5 0 1.6 (1.35)
• E 1 10 1 2.4 (1.4)
• ZOPA is 2.1 to 3
• Case doesnt state chance of winning absent
  Jessie!
• Case C 2.6 1.5 (.6 .2) .3 1.85 1.5
  (.12.18) .05
• Case D 1.6 1.2 (.3 .1) 1.35 1.2
  (.06.09)
• Case E 2.4 1 (.6 .2) .6 1.4 1
  (.12.18) .1

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Jessie Jumpshot

• What is Jessies reservation price?

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Jessie Jumpshot

• What is Jessies reservation price?
• 2.21 (so that after paying the agent 5, Jessie
  still has 2.1)
• Note that 0.952.205 2.1
• Non-monetary values (winning championship)

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Jessie Jumpshot

• What is Jessies reservation price?
• 2.21 (so that after paying the agent 5, Jessie
  still has 2.1)
• Note that 0.952.205 2.1
• Not quite What if Jessie gets 1 million salary
  plus rest in bonus.
• Then Jessies reservation price

9
Jessie Jumpshot

• Pkg Sal Merch Bonus Jess / Sharks Jess/Agent
• Profits
• A 2.5 0 0 2.5 (2.5) 2.375 / .125
• B 2 0 1.5 2.9 (2.15) 2.8 / .1
• C 1.5 10 0.5 2.6 (1.85) 2.525 / .075
• E 1 10 1 2.4 (1.4) 2.35 / 0.05
• BATNA should take into account payment to agent!

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Pareto Optimality

• Pkg Sal Merch Bonus Jess / Sharks Jess/Agent
• Profits
• A 2.5 0 0 2.5 (2.5) 2.375 / .125
• B 2 0 1.5 2.9 (2.15) 2.8 / .1
• C 1.5 10 0.5 2.6 (1.85) 2.525 / .075
• E 1 10 1 2.4 (1.4) 2.35 / 0.05
• Only B, C, and E.
• Say you are at C, any ideas?
• Post-settlement settlement -- how did this work
  for you?

11
Creating Gains

• Differences
• Chance of winning Jessie 60, Sharks 10
• Revenues if win Jessie 10, Sharks 12.
• Revenue if lose Jessie 5, Sharks 2
• What is value to Jessie of 10 of revenues up to
  10m vs 10 of rev.
• Same value, but cost of latter is higher to
  Sharks
• What is cost to Sharks of 10 of revenues if lose
  vs. 10 of first 2m if lose
• Same cost, but value of latter is higher to
  Jessie

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Pareto Optimality

• Pkg Sal Merch Bonus Jess / Sharks Jess/Agent
• Profits
• B 2 0 1.5 2.9 (2.15) 2.8 / .1
• C 1.5 10 0.5 2.6 (1.85) 2.525 / .075
• E 1 10 1 2.4 (1.4) 2.35 / 0.05
• But none are Pareto in a larger context.
• Jessie gets 2--5 in M if lose (as Sharks think
  this has zero probability) -- worth .431.2
• Sharks get 10--12 in M if win (as Jessie thinks
  this has zero chance)

13
Dividing the Pie
2
Sharks
Lose
Jessie
12
5
Sharks
Win
Jessie
10
No cost to Sharks to give Jessie 2--5 if lose. No
cost to Jessie to give Sharks 10--12 if win.
Expected value is 4031.2 to Jessie 102 0.2
to Sharks
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Pareto Optimality

• Pkg Sal Merch Bonus Jess / Sharks Jess/Agent
• Profits
• B 2 0 1.5 2.9 (2.15) 2.8 / .1
• C 1.5 10 0.5 2.6 (1.85) 2.525 / .075
• E 1 10 1 2.4 (1.4) 2.35 / 0.05
• But none are Pareto in a larger context.
• Sharks get 0--2 in merchandising (M) as M is
  always at least 2
• Jessie gets 2--5 in M if lose (as Sharks think
  this has zero probability) -- worth .431.2
• Sharks get 10--12 in M if win (as Jessie thinks
  this has zero chance)
• If Jessie gets 100 of 2--10 if Sharks win --
  worth .68 4.8 costs .18.8 to Sharks (61)
• Add 1 million guarantee and package is worth 7m
  to Jessie with cost of 1.8 to Sharks (this beats
  B and C). If Jessie only gets half of 2--10 M,
  then Jessie gets 4, Sharks pay 1.4 and so this
  beats/ties E. Hence none of B, C, and E are
  Pareto.
• What about adding a bonus if win? For each
  dollar, Jessie goes up .6, Sharks go down 0.1.
• Again, 61. If add 2 million bonus, Sharks are
  at 2 million, Jessie is at 8.2m
• What about first 2m of bonus? Does Jessie really
  need a salary guarantee?

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Betting

• What do you (as Jessie) make of the fact that
  Sharks think chance of winning is 10
• Are these joint gains real?
• Do you revise your beliefs?
• Do you as Sharks or as Jessie reveal your true
  views? (If so, to whom?)
• Jessie is betting 8 million that he will win the
  championship. How is this different than what
  Pete Rose did?
• Is it better or worse?

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What is the Moral?
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What is the Moral?
AGREEING TO DISAGREE
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Sharing Information

• Revealing the right information creates value,
  revealing wrong information puts you at a
  disadvantage
• Revealing beliefs
• Revealing reservation price
• Revealing market comparables
• Rug Story

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Incentive Conflicts

• Pkg Sal Merch Bonus Jess / Sharks Jess/Agent
• Profits
• A 2.5 0 0 2.5 (2.5) 2.375 / .125
• B 2 0 1.5 2.9 (2.15) 2.8 / .1
• C 1.5 10 0.5 2.6 (1.85) 2.525 / .075
• E 1 10 1 2.4 (1.4) 2.35 / 0.05
• F 1 100 of 2--10m 0 7 (1.8) 6.95 / 0.05
• F is far best for Jessie, A is far best for
  Agent!

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Incentives

• What do you expect the agent will do that may not
  be in Jessies interest
• What is agent getting 5 of Sharks contract but
  nothing of Five-Ways? (Not very sensible)
• How would you redesign the contract?

21

• Who lies in tape?
• About probability of winning
• About size of merchandise profits
• Does that help them?

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Team 1

• Interests versus positions
• Sharks talk/listen ratio is off
• What do you think of Jessies agent?
• Is it reasonable or not to consider salaries
  below 2.5m when that was on the table?
• Concede at the right price?

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Team 2

• Sharks listen
• Truthful revelation of Jessies probabilities
• Sharks reciprocate
• Jessie Im that good. Sharks Then bet on your
  yourself
• Less upfront and more performance based

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Team 3

• What share is reasonable 50
• Do you have the numbers in place at that point?
• Sharks accept principle without accepting 50
  anchor.
• Well done or not?

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Team 3

• What share is reasonable 50
• Do you have the numbers in place at that point?
• Sharks accept principle without accepting 50
  anchor.
• (But perhaps they should go even more. What fixed
  salary would you give up to go to 50? What about
  100?)

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Team 4

• Exaggerating value of merchandising
• Jessie wants contingency fee
• Agent resists
• Sharks appeal to Jessie