MOMS.

COM
Preferences

Revenue

WCHI
(Buyer)
$8.4 M

HOLLYVILLE
(Seller)
N/A

$60,000

$35,000

$30,000

$70,000

$(1,600,000)
$(800,000)
$0
$800,000
$1,600,000

$500,000
$250,000
$0
$(250,000)
$(500,000)

10%
20%
30%
40%
50%

-20%
-35%
-50%

$20,000

$10,000

20%
50%
10%
10%
10%

10%
10%
10%
50%
20%

$3.0MM

$2.5MM

Price/Episode
Limit
Aspiration
Runs/Episode
Adjustment
4
5
6
7
8
Financing Savings/Cost
Year 1
Year 2
Year 3
Year 4
Year 5
Juniors
Reservation Price
Ratings (Est.
Likelihood)
2-3
3-4
4-5
5-6
6-7
Alternative Deal Value

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.

MOMS.COM
Price/Title Agreement
The Issue: What price/title should be agreed upon?
$30,000
WCHI
(t)

$35,000
Hollyville
(rp)

$40,000

$45,000

$50,000

$55,000

$60,000
WCHI
(rp)

$65,000

Critical Points:
WCHI (t): WCHIs target price is $30,000
Hollyville (t): Hollyvilles target price is $70,000
WCHI (rp): WCHIs reservation price is $60,000
Hollyville (rp): Hollyvilles reservation price is $35,000

Bargaining Zone:
$35,000 -------------- $60,000

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.

$70,000
Hollyville
(t)

MOMS.COM
Runs and Financing Trade-Off
6

Hollyville's Profit

5
4
3
B
2
1

0
0

WCHI's Profit (in Millions of Dollars)

Outcome

WCHI/
Hollyville

Price

# Runs

Financing

1.49/0.89

$46,000

25% Y(0)
25% Y(1-3)

1.5/2.5

$55,000

100% Y(0)

3.0/1.0

$40,000

100% Y(0)

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.

Other

MOMS.COM
Adding Juniors
6

Hollyville's Profits

5
4
3

D
B

2
E
1

0
0

WCHI's Profits (in Millions of Dollars)

Outcome

WCHI/
Hollyville

Price

# Runs

Financing

1.49/0.89

$46,000

25% Y(0)
25% Y(1-3)

1.5/2.5

$55,000

100% Y(0)

3.0/1.0

$40,000

100% Y(0)

2.0/3.0

$55,000

100% Y(0)

Juniors
($15K)

3.5/1.5

$40,000

100% Y(0)

Juniors
($15K)

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.

Other

MOMS.COM
Betting on Different Expectations
The Problem: Different Expectations on Future Ratings

Likelihood
Ratings

WCHI

Hollyville

2-3

20%

10%

3-4

50%

10%

4-5

10%

10%

5-6

10%

50%

6-7

10%

20%

The Solution: Betting on Different Expectations

If ratings are < 4, WCHI receives $1MM rebate from Hollyville
If ratings are > 5, WCHI pays $1MM surcharge to Hollyville

Expected Value:
WCHI
Hollyville

0.7($1MM) + 0.1($0) + 0.2(-$1MM) = $500,000

0.2($-1MM) + 0.1($0) + 0.7($1MM) = $500,000

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.

MOMS.COM
Adding a Contingency
6

Hollyville's Profits

5
4
F
3

D
B

2
E
1

0
0

WCHI's Profit (in Millions of Dollars)

Outcome

WCHI/
Hollyville

Price

# Runs

Financing

1.49/0.99

$46,000

25% Y(0)
25% Y(1-3)

1.5/2.5

$55,000

100% Y(0)

3.0/1.0

$40,000

100% Y(0)

2.0/3.0

$55,000

100% Y(0)

Juniors ($15K)

3.5/1.5

$40,000

100% Y(0)

Juniors ($15K)

2.5/3.5

$55,000

100% Y(0)

Juniors ($15K)
Bet:Diff Exp

4.0/2.0

$40,000

100% Y(0)

Juniors ($15K)
Bet:Diff Exp

Other

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.

MOMS.COM
The Six Benefits of Contingent Contracts

1.

Contingent contracts allow negotiators to build on

their differences. Dont argue over the future. Bet
on it.

2.

Contingent contracts allow negotiators to diagnose

the honesty of the other side.

3.

Contingent contracts allow negotiators to reduce

risk through risk sharing.

4.

Contingent contracts allow negotiators to increase

the incentive of the parties to perform at or above
contractually specified levels.

5.

Contingent contracts allow negotiators to manage

decision-making biases.

6.

Contingent contracts allow negotiators to solve

problems of trust, when one side has information
that the other lacks.

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.

MOMS.COM
Creating Value in Negotiation

1.

Look for issues that can be traded off to create

value

2.

Add side issues that benefit both parties

3.

Search for differences in

time preferences
risk preferences
expectations

that could be capitalized on by a contingent

contract

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.

MOMS.COM
Getting Information to Create Value
1.

Build Trust and Share Information

2.

Ask Questions

3.

Give Away Some Information

4.

Make Multiple Offers Simultaneously

5.

Search for Post-Settlement Settlements

2002-2008 Dispute Resolution Research Center, Northwestern University. All rights reserved.