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Prof Stephen W. Nason All Rights Reserved
SESSION 1
NEGOTIATION CASE: SUGAR BOWL
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Prof Stephen W. Nason
PhD
Adjunct Associate Professor of Management
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Prof Stephen W. Nason All Rights Reserved
Sugar Bowl
Read the your information (10 minutes)
Make sure you understand the facts well
Act according to your role
Negotiate (15 minutes)
Do the best for your self as possible
Other rules
None Well no physical violence or excessively demeaning language
Can NOT show your confidential information
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NEGOTIATION CASE: Sugar Bowl
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Prof Stephen W. Nason All Rights Reserved
What is the Sugar Bowl Worth?
Buyers and Sellers look at exactly the same information and come up with
different assessments
Selective perception
Egocentrism
Errors in calculation
Lack of preparation or sloppy presentation
Not worth the same to both buyers an sellers
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What is it Worth to the Buyer?
What is the Buyers Bottom Line?
Bottom Line = Reservation point
Buyers Reservation point?
$3,500
$3,000 everything in your check book
$1,200 highest appraised value
$800 average appraised value
$400 lowest appraised value
Which is correct?
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How Do you Determine your Bottom
Line?
What are your alternatives if the negotiation fails
What is your very Best Alternative
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Best Alternative To a Negotiated
Agreement (BATNA)
Your best alternative if the negotiation fails
you should never accept an offer in a negotiation that is worse then your
BATNA
need understand not only your own BATNA but you opponents BATNA as
well
You BATNA is your POWER
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What is the Buyers BATNA?
BATNA (best alternative) is to sell incomplete set
How much is this worth?
Tea set (w/o bowl) worth maybe $6,000
Say $6,000 (auction)
Tea set (w bowl) worth $8,000 - $8,500
Say worth $8500
$8,500 $6,000 = $2,500
To buyer the bowl is worth $2,500
This is the difference between the deal and your BATNA
What if buyer could find another Bowl on line for $2,000?
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What is the Sellers Bottom Line?
Sellers Reservation point?
$350 what originally paid
$650 original sale price
Appraisal value
$400 lowest appraised value
$1,200 highest appraised value
$800 average appraised value
Any other possibilities?
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Sellers BATNA?
Wait for another customer
More difficult, not successful so far
Only offers for less then $300
So if can not sell to buyer today will wait for another buyer and maybe
get $300 if lucky
Sellers Reservation point?
Anything more than $300 is better than your other alternative
$300 = RP
But $300 is less than your cost of $350!
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Bargaining Zone
The area of possible agreement between two parties in a negotiation, the
area between both parties reservation points
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Initial offer
Initial offerReservation point
Min. acceptable offer
Reservation pointMax. acceptable offer
NEGOTIATION CASE: Sugar Bowl
Negotiator 1
(Buyer)
Negotiator 2
(Seller)
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Bargaining Zone: Sugar Bowl
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NEGOTIATION CASE: Sugar Bowl
Initial offer
$ ??
Minimum
Maximum price
$ ??
Initial offer
Buyer
Seller
$2,500
$300
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Sugar Bowl: Keys to Success
Keys to success:
Know own Reservation Point
What about other sides reservation point?
Did Anyone know the other sides bottom line? Did any seller know that buyer had complete tea set?
Did any buyer know that the seller was having trouble getting rid of the sugar
bowl?
How did sellers with high prices and buyers with low prices get such a good
deal?
What happened with people who ended up with poor deals?
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Sugar Bowl: Opening Offers and
Aspiration Points
Opening offers: is making the first offer good or bad
Bad
Good
Aspiration: Goals
Creative Agreements?
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Conclusion:
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2. Know your own reservation point
and you will NEVER lose!
3. Know your opponents reservation point
and you will almost always win!
NEGOTIATION CASE: Sugar Bowl
1. What you do in the negotiation makes a
big impact on what you end up with!