Business and Commercial Role-Play:

Cape Development Case

Two-party real estate negotiation between a developer and a representative of the owner of a parcel surrounded by the developer's land, over the future of both parcels

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SCENARIO:

Approximately three years ago, Cape Development Corporation sold one of its thirteen adjoining lots to Charlie Davis. Although Davis had plans for the lot, it is still undeveloped. The City Council has now passed a cluster zoning ordinance which permits townhouse development if some land is permanently dedicated as open space. The 12 remaining lots, which are still owned by CDC, together with Davis' lot, make a prime location for a cluster development. Such a financial asset is appealing to both parties, and has led them to this meeting to pursue a development. Both Davis and CDC have empowered agents to represent them, giving them authority up to maximum offers.

 

MECHANICS:

This one-on-one negotiation can run from 30-60 minutes. Teams of two can also be used, with somewhat longer times for preparation and negotiation.

 

TEACHING MATERIALS:

Role Specific:

Confidential Instructions for:

  • Cape Development Corp. Representative
  • Charlie Davis' Representative

 

Teacher's Package:

  • All of the Above

 

PROCESS THEMES:

Attorney/Client relations; Authority; Competition v. Cooperation; Cost-benefit analysis; Financial analysis; Information exchange; Joint gains; Lawyering; Objective criteria; Offers, first; Options, generating; Pareto optimization; Quantitative analysis; Relationship; Reservation price; Risk aversion

 

MAJOR LESSONS:

There is tremendous opportunity for exploring creative options in this negotiation. Poorly handled, however, an adversarial deadlock can result. What techniques minimize the likelihood of that outcome?

The distributive bargaining component of the negotiation permits participants to perform cost-benefit analysis, as well as reflect on the importance of focusing on joint gains.

It is useful to explore how the participants use their reservation prices to determine opening positions and concession strategies. Is this justified? Effective?

Participants can see what role analysis of projected costs plays in achieving a Pareto-optimal outcome, and what effect it has on the decision-making process.

Cape Development Case Attributes

Time required: 30 minutes-1 hour
Number of participants: 2
Teams involved: No
Agent present: Lawyer
Neutral third party present: None
Scoreable: No
Teaching notes available: No