Prior to the expansion, the Fountainbleau profits were $60m and the Eden Roc's profits were $25m. If the Fontainebleau completes the highrise expansion, their profits will increase by A. If the expansion is built and Eden Roc makes no changes, Eden Roc's profits will fall by B from the shadow cast on its pool area. Eden Roc can convert the shaded region of their property to a nightclub (which is unaffected by any shadow). In that case, Eden Roc will earn a total profit of C. Alternatively, the Fountainblue can demolish the expansion and instead put in two story condominiums which will not interfere with Eden Roc's sunlight, but then will only increase profit by D. Suppose that Eden Roc loses the lawsuit, and Fountainebleau is permitted to complete construction as it chooses. A) What will each party choose to do in the absence of bargaining? B) What will be the threat values? C) What is the cooperative surplus from bargaining? Enter zero if there is no cooperative surplus to gain. D) With equal bargaining power, what price will they agree on? Specifically, which party will pay the other and what will they agree to each do? If there is no bargain possible, simply state that. E) What will be the final payoffs after bargaining is complete? For questions in this scenario, you must substitute A, B, C, D with the numbers you got from Question 1. Do NOT use those letters to answer questions. *Note A, B, C, and D are in millions. A=11 B=9.25 C=14.25 D=8
E1
Prior to the expansion, the Fountainbleau profits were $60m and the Eden Roc's profits were $25m.
If the Fontainebleau completes the highrise expansion, their profits will increase by A.
If the expansion is built and Eden Roc makes no changes, Eden Roc's profits will fall by B from the shadow cast on its pool area.
Eden Roc can convert the shaded region of their property to a nightclub (which is unaffected by any shadow). In that case, Eden Roc will earn a total profit of C.
Alternatively, the Fountainblue can demolish the expansion and instead put in two story condominiums which will not interfere with Eden Roc's sunlight, but then will only increase profit by D.
Suppose that Eden Roc loses the lawsuit, and Fountainebleau is permitted to complete construction as it chooses.
A) What will each party choose to do in the absence of bargaining?
B) What will be the threat values?
C) What is the cooperative surplus from bargaining? Enter zero if there is no cooperative surplus to gain.
D) With equal bargaining power, what price will they agree on? Specifically, which party will pay the other and what will they agree to each do? If there is no bargain possible, simply state that.
E) What will be the final payoffs after bargaining is complete?
For questions in this scenario, you must substitute A, B, C, D with the numbers you got from Question 1. Do NOT use those letters to answer questions.
*Note A, B, C, and D are in millions.
A=11
B=9.25
C=14.25
D=8
Step by step
Solved in 7 steps
