Negotiations.part1 (1)

Ouldyourevealyourbatnaand reservationprice

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Unformatted text preview: l The Negotiation Bargaining Zone Buyer’s Target Price Buyer’s Reservation Price (BR) (e.g., $25M) Seller’s Reservation Price (SR) (e.g., $17M) Seller’s Target • The bargaining zone is the space between the buyer’s reservation price (BR) and the seller’s reservation price (SR) – that is, the zone of possible agreement. • If BR > SR, then a Positive Bargaining Zone exists. The zone of agreement is from SR to BR (e.g., $8M). A Negative Bargaining Zone Seller’s Reservation Price (SR) (e.g., $25M) Buyer’s Reservation Price (BR) (e.g., $17M) If BR < SR, then there is no zone of possible agreement. Key Negotiation Principles Best Alternative To a Negotiated Agreement (BATNA) Reservation price Bargaining zone Aspiration level Aspiration Level Aspiration Level Final Price ( in millions) $23.5 $23.0 $22.5 $22.0 $21.5 $21.0 $20.5 Buyer focused on BATNA Buyer focused on aspiration level Distributive Bargaining Tactics First offers Concessions Persuasion First Offers Who made the first offer? How did the first offer affect the negotiation? First Offers in Synertech­Dosagen First Offers in Synertech­Dosagen Final Price (in millions) $25 $24 $23 $22 $21 $20 $19 $18 $17 Buyer made first offer Seller made first offer • There is a high correlation between the first offer and the final price • Counteroffers and later concession behavior less predictive of final price The First Offer How high should the first offer be? “As high as you can go without embarrassing yourself in front of a respected 3rd party” (Fisher & Ury, 1991) What’s embarrassing? What’s optimistic? Learn the market! Only let the other party make the first offer when You have no information It is inappropriate to do so (e.g., job negotiations) Immediately re­anchor if your counterpart makes the first offer Concessions & Persuasion Allow yourself room to make concessions Don’t go in with a “first and final offer” Make bi­lateral, not uni­lateral concessions Make your concessions smaller as you approach your goal Use objective rationale to support your argument Again, learn the market Distributive Negotiation Strategies Know your BATNA Strengthen your BATNA whenever possible Know your reservation price Do not reveal your reservation price Research the other party’s BATNA/reservation price Define your aspiration level and focus on that Make first offers whenever possible If they make the first offer, immediately re­anchor Watch how you are making concessions Prepare objective rationale for your arguments...
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