strategy and tactics

strategy and tactics - CHAPTER 3 Strategy and Tactics of...

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CHAPTER 3 Strategy and Tactics of Distributive B argaining Eighteen months ago Larry decided to move closer to where he works. Following this decision to move, he put his house on the market and started to look for a new one- but with no results. Fourteen months later, Larry finally received an offer to buy his house and, after a brief negotiation, settled on the selling price. Because he had not yet found a house to buy, he postponed closing the sale for six months to give himseif addi- tional time to look. The buyer, Barbara, was not huppy about having to wait that long because of the inconvenience and the difficulty of getting a bank to guarantee an inter- est rate so far in advance. Lany adjusted the price so that Barbara would accept this postponement, but it was clear that she would be much happier if he could move the date closer. There were relatively few houses on the market in the area where Larry wanted to live, and none of them was satisfactory. He jokingly said that unless something new came on the market, he would be sleeping in a tent on the town common when the leaves turned in the fall. Two months later a house came on the market that met his require- ments. The seller, Monica, set the asking price at $145,000, which was $10,000 above what Larry hoped to pay but $5,000 below the most he would be willing to pay. Larry knew that the more he paid for the house, the less he would have to make some very desirable alterations, buy draperies and some new furniture, and hire a moving company. Monica already had attractive drapes in the house. She was moving to a new house; if she could not use the drapes in the new house, Lany might be able to purchase them or ask Monica to include them with the sale. The same might be true for several rugs, hall tables, and other items. Larry also learned that Monica's new home was supposed to be finished soon, about the time Larry was to close on the sale of his present house. This illustration provides the basic elements of a distributive bargaining situation. As we've mentioned in Chapters I and2, it is also called competitive, or win-lose, bar- gaining. In a distributive bargaining situation, the goals of one party are usually in fun- damental and direct conflict with the goals of the other party. Resources are fixed and limited, and both parties want to maximize their share of the resources. As a result, each party will use a set of strategies to maximize his or her share of the outcomes to be obtained. One important strategy is to guard information carefully-one party tries to give information to the other party only when it provides a sffategic advantage. Mean- while, it is highly desirable to get information from the other party to improve negoti- ation power. Distributive bargaining is basically a competition over who is going to get the most of a limited resource (often money). Whether or not one or both parties achieve their objectives will depend on the strategies and tactics they employ.r t-
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This note was uploaded on 04/29/2011 for the course ECON 101 taught by Professor Gottlieb during the Spring '08 term at Rutgers.

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strategy and tactics - CHAPTER 3 Strategy and Tactics of...

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