RPs
seller’s reservation price (min value)
RPb
buyer’s reservation price (highest walk-away price)
ZOPA
Zone of possible agreement
RPs —> RPb (seller’s surplus + buyer’s surplus)
How to prepare for negotiations
- Determine your limit (situation with and without deal)
- Define objective (value of time, creating competition)
- Determine target (look outward, dominant logic -> target often influenced. by precedents)
Questions to ask to win positioning battle
- What is your problem (RP)?
- How can we help?
Moderate opening offer
+ acceptable for both sides, quick
- leaves little bargaining room
- leaves money on the table
- induces other side to revise expectations (get greedy)
- creates asymmetry (upper hand of counterpart)
Boulwarian offer
extreme reasonable offer, “take it or leave it” and FACTS + LOGIC = FAIR
- process perceived as unfair (leaves other side out)
- bias, no universal fair price
- process is excessively rigid (tense and confrontational)
How to react to Boulwarian offer
- stroke ego “appreciate offer”
- no. counteroffer “sorry, I can’t accept your offer BUT”
- adjourn to check the facts and let the outcome be decided by (multiple) experts “check prices”
Extreme offer
+ startle other side to prospect what they really want
- loss of credibility / trust
- Perceived as insincere / unfair
-> outside of fuzzy range
How far can you go with extreme offers?
- with perfect information, a credible offer is an acceptable one
- with asymmetric information unacceptable offers may be credible
-> the more uncertainty, the more ambiguous your offer
How to react to extreme offer
DO
- interrupt (leave doors open)
- answer with question
- reply with similar offer (humor)
- reverse (if feasible)
- silent treatment (force reaction)
DONT
- let other side anchor
- engage in argumentation (will anchor)
react emotionally (give away information)
Tough offer
+ not yet acceptable but discussable (credible)
+ most efficient
-> within fuzzy range (don’t directly accept, leaves money on table)
How to react to tough offer
- similar counteroffer
- when thinking about price: prudent self vs ambitious self -> prudent self will never strike a good deal
Who moves first?
- No Information: Opening offer could reveal central information
- Information: Opportunity to anchor (in our favour), if
- opponent is ill-informed
- we have aura of expertise
Tactics of Concessions
- Probing: find other RP-> avoid overshooting
- Signalling: Manage opponents beliefs, give him favorable information for you
- Focal Points: Identify the most likely candidates for a negotiated agreement?
- Commitment: find ways to dig and resist demands for concession
->Make it easy for opponent to concede?
How to identify your own reservation price
- evaluate situation with and without a deal
- define your BATNA
What is the negotiation dance?
- Amount of opening offer
- Who moves first
- Reacting to opening offers
- Concession patterns
