Instructions for Saving Troubled Stutts Corporation Exercise

3 Pages Posted: 23 Jun 2009

See all articles by Samuel E. Bodily

Samuel E. Bodily

University of Virginia - Darden School of Business

Abstract

This case, part of a series (see also UVA-QA-0712–UVA-QA-0714), contains the instructions for the series. Two individuals own all the capital in Stutts Corporation. Decker owns all the debt and Evenson owns all the equity. Unless Decker and Evenson supply workout loans, Stutts will become bankrupt immediately. If they do provide the loans, Stutts will go into three possible states: recover, restructure, liquidate. The payouts to Decker and Evenson differ in each state. The two parties have differing probabilities for these three states and differing budget limits for adding capital; probabilities and budgets are private, confidential information. Students playing each role will negotiate, in pairs, a deal for the additional financing of Stutts. Without state-contingent side payments and/or altered ownership arrangements, players cannot strike a deal that is good for both sides, based on their differing probabilities and budget constraints. Students will carry out a preliminary negotiation, discuss it in class, and then have a chance to conduct a final analysis, based on new ideas from class discussion.

Excerpt

UVA-QA-0715

INSTRUCTIONS FOR

EXERCISE

You will play the role of either Evenson or Decker in the Stutts negotiation. You will be randomly assigned to your role. Your objective is to maximize your expected monetary value (EMV).

Prepare the case “Saving Troubled Stutts Corporation: Widely Known Information” (UVA-QA-0712) before you learn which role you will play. When you learn your role, you will receive further information: a document (case) that contains both private and confidential information known only to your side of the negotiation. You may not show your document to the other side. You may mention information in your document in your conversations with the other party, if you wish, but do not show the other side your case. (This directive is intended to keep things real—in a real setting, there would be no document with the same credibility in expressing your beliefs and values as the case you have.)

Preliminary Negotiation

. . .

Keywords: decision analysis, negotiation, side payments, contingent contracts, BATNA, Pareto optimality

Suggested Citation

Bodily, Samuel E., Instructions for Saving Troubled Stutts Corporation Exercise. Darden Case No. UVA-QA-0715. Available at SSRN: https://ssrn.com/abstract=1423301

Samuel E. Bodily (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4813 (Phone)
434-293-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/bodily.htm

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