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NEGOTIATION CASE: SUGAR BOWL

Prof Stephen W. Nason PhD Adjunct Associate Professor of Management

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

NEGOTIATION CASE: Sugar Bowl

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Sugar Bowl

Are you happy with the deal?

Yes
No

What are the results? How much was the sugar bowl worth?

NEGOTIATION CASE: Sugar Bowl

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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

NEGOTIATION CASE: Sugar Bowl

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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? NEGOTIATION CASE: Sugar Bowl

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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

NEGOTIATION CASE: Sugar Bowl

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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?

NEGOTIATION CASE: Sugar Bowl

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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? NEGOTIATION CASE: Sugar Bowl

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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! NEGOTIATION CASE: Sugar Bowl
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Bargaining Zone
The area of possible agreement between two parties in a negotiation, the

area between both parties reservation points

Initial offer

Negotiator 1 (Buyer)

Reservation point Max. acceptable offer

Reservation point Min. acceptable offer

Negotiator 2 (Seller)

Initial offer

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Bargaining Zone: Sugar Bowl

Initial offer $ ??

Buyer

Maximum price $2,500

$300 Minimum

Seller

$ ?? Initial offer

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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:
1. What you do in the negotiation makes a big impact on what you end up with!

2. Know your own reservation point and you will NEVER lose! 3. Know your opponents reservation point and you will almost always win!
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