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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
• 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
Final Price ( in millions)
$20.5 Buyer focused on
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)
Buyer made first offer Seller made first offer • There is a high
the first offer and the
• Counteroffers and
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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- Fall '07