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352 Resource allocation and negotiation problems
The values attached to the possible levels of landscaping are
shown below.
Landscaping Retailer’s value Council’s value
None 100 0
Partial 60 20
Complete 0 100
Details of the swing weights that the two parties attach to the three
issues are shown below (100 = the most important swing).
Retailer’s Council’s
Change in outcome
weight weight
Land price increases from $2 million to
$4 million
100 100
Community center not built to community
center built
66 85
No landscaping to ‘complete landscaping’ 10 45
The following tentative deal has been reached. The land will be sold
by the council for $2 million and a community center will be built,
but there will be no landscaping of the site.
(a) Assuming that, for both parties, the issues are mutually preference
independent, verify that the values of the tentative deal
to the retailer and the council are 62.50 and 36.96, respectively
(using normalized weights).
(b) Table 13.4 shows the values of all the possible deals to the
two parties (assuming that only the outcomes given above
are possible). This information is also displayed in Figure 13.9.
The labels on the chart show the values of the deals to the
council.
(i) Use the chart and table to advise the two parties on which
deal they should agree on.
(ii) Use the concept of Pareto optimality to explain how you
arrived at your recommendation.
(c) One of the supermarket negotiators favors your recommended
deal because, having seen the value of the deal to the supermarket
and the value to the council, he concludes that the supermarket
has got a better deal than the council. Is his thinking correct?
Explain your answer.