After building a profitable construction company together over several decades, Larry Stevenson

and Jim Shapiro recognized that their differences had become irreconcilable. Stevenson wanted to buy

out Shapiro, who was willing to sell for the right price. After months of haggling and legal maneuvering,

Stevenson made his final offer: $8.5 million for Shapiro’s shares in the company.

The company is worth about $20 million, Shapiro thought to himself. I own 49% of the shares.

Heck, I helped build this company. I’m not going to accept anything less than my fair share—$10 million.

I’d rather fight in court than accept $8.5 million. Shapiro rejected the offer, and each party prepared for

a trial.

Shapiro’s rationale for rejecting Stevenson’s offer seemed reasonable enough. Furthermore,

Shapiro’s lawyers assured him, a court ruling very likely would be in his favor.

a) What do you think about Shapiro’s decision? Is it right or wrong? Why?

b) If you were Shapiro in this case, what would you asscess your BATNA?

BATNA stands for best alternative to a negotiated agreement. A good negotiator first has to study this first to avoid making mistakes before they accept or reject a deal.

Since he did not consider this first, he is likely to make a wrong choice.

b.) To make this evaluation, Shapiro should have first gotten the necessary information.

In the complete question, his litigation cost = $500000

He had 70% chance of winning $10m

and 30% chance of winning $3m

We have to calculate his BATNA as

70% x 10,000,000 = $7m

30% x 3,000,000 = $900000

7,000,000+900000-500000

= $7,400,000

= $7.4m

Shapiro's BATNA is less than what Stevenson offered him at $8.5m. If he had calculated his BATNA first, he would have known better to accept Stevenson's offer.

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