Introduction to Computer Simulation

There are two parts to this computerized simulation format:

1. The COST program,

This program allows you to experiment with various contract offers to ascertain their relative costs. This will give you a better idea as to how expensive each economic factor really is.

2. The NEGOTIATION program:

This part simulates the collective bargaining process between a firm and its union. You are management; the computer will negotiate for labor. The major purpose of the Negotiation program is to familiarize you with the various issues in the contract by playing against the computer which acts as the union.

The simulation involves five phases:

Phase 1: Preparation: You should review the current agreement/contract and familiarize yourself with the Company, the Union, etc. Each participant can negotiate individually with the computer using both costing and negotiation programs.

Phase II: Pre-bargaining Strategy: You should determine your negotiation strategy. Please complete the Form A: Calculation of Projected Profits; Form B: Initial non-economic priorities; Form C: Initial economic priorities and Form D: Initial demands worksheets before starting the computer session.

Phase III: Opening Negotiation Session: Enter your initial offers from your initial demands worksheet should be completed before starting the computer session. You may be prompted to respond to other items you did not anticipate. Do your best.

Phase IV: Additional Negotiation Sessions: Proposals and counter proposals of economic and non-economic items are exchanged until both sides reach agreement on all items. Note that before you start each new negotiation session, you should have the computer print a copy of review of current situation and union demand.

Phase V: Print out the final agreement and an estimated contract cost of the agreement. Compare the final settlement with your contract objectives from Phase II and assess how well you attained your targets. Write up your assessment (one page maximum)

The program is self-explanatory and you can easily follow the instructions as you proceed through the simulation.

Scenario: The current contract will expire in four weeks and you have time for about eight bargaining sessions before the expiration date. The union has been very militant in its attitude up to this point. The workers feel they have some catching up to do in terms of financial and non-financial aspects of the contract. The union has a sizable strike fund that it can use for the welfare of its workers, while the firm has about 4-5 weeks of finished goods in inventory. If negotiations do not result in a settlement, then the union may strike. In that case, you will have about 4-5 weeks of inventory to sell, and then your firm would suffer a great financial loss and possibly go out of business.

First, you should run the COST program to learn the cost increases associated with each other of the contract provisions. It is critical that management be able to pay any negotiated change in the contract.

I will assign you a six digit entry code (e.g., 100001) that you will need to run the program. You will have 1.5 hours to negotiate against the computer. If that is not enough, you can complete the session on your own time.

For grading purposes, you have to report:

1. Pre-Bargaining strategy, as outlined in Forms A, B, C, and D

2. The issues and conclusions from each negotiation session (a print copy of review of current situation and union demand);

3. A copy of the final agreement with a total contract cost.

4. Your assessment of the extent to which the final contract met your contract objectives. Any surprises?