Jessie Jumpshot Full 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”

Jessie Jumpshot Package Sal %Merch Profits Bonus A 2.5 0 0 B 2 0 1.5 D 1.2 5% 0 E 1 10% 1

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 doesn’t 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

Jessie Jumpshot Pkg Sal %Merch Bonus Jess / Sharks Profits 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

Jessie Jumpshot Pkg Sal %Merch Bonus Jess / Sharks BATNAs Profits D 1.2 5% 0 1.6 (1.35) E 1 10% 1 2.4 (1.4) ZOPA is 2.1 to 3 Case doesn’t 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

Jessie Jumpshot What is Jessie’s reservation price?

Jessie Jumpshot What is Jessie’s reservation price? $2.21 (so that after paying the agent 5%, Jessie still has 2.1) Note that 0.95*2.205 = 2.1 Non-monetary values (winning championship)

Jessie Jumpshot What is Jessie’s reservation price? $2.21 (so that after paying the agent 5%, Jessie still has 2.1) Note that 0.95*2.205 = 2.1 Not quite: What if Jessie gets $1 million salary plus rest in bonus. Then Jessie’s reservation price

Jessie Jumpshot Pkg Sal %Merch Bonus Jess / Sharks Jess/Agent Profits BATNA should take into account payment to agent!

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?

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

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 .4*3=1.2 Sharks get 10--12 in M if win (as Jessie thinks this has zero chance)

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 40%*3=1.2 to Jessie; 10%*2 =0.2 to Sharks

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 .4*3=1.2 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 .6*8 = 4.8; costs .1*8=.8 to Sharks (6:1) 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, 6:1. 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?

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?

What is the Moral?

What is the Moral? AGREEING TO DISAGREE

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

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!

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

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

Team #1 Interests versus positions Sharks talk/listen ratio is off What do you think of Jessie’s agent? Is it reasonable or not to consider salaries below 2.5m when that was on the table? Concede at the right price?

Team #2 Sharks listen Truthful revelation of Jessie’s probabilities Shark’s reciprocate Jessie: I’m that good. Shark’s: Then bet on your yourself Less upfront and more performance based

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?

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%?)

Team #4 Exaggerating value of merchandising Jessie wants contingency fee Agent resists Sharks appeal to Jessie