01-2 Dist Sugar Bowl

8/3/2019 01-2 Dist Sugar Bowl

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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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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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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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7/15 Prof Stephen W. Nason All Rights Reserved

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


Negotiator 1

(Buyer)

Negotiator 2

(Seller)



Bargaining Zone: Sugar Bowl

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Initial offer

$ ??

Minimum

Maximum price

$ ??

Initial offer

Buyer

Seller

$2,500

$300



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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15/15 Prof Stephen W Nason All Rights Reserved

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!


1. What you do in the negotiation makes a

big impact on what you end up with!

Documents

01-2 Dist Sugar Bowl