5much of this section comes from or has been

Info icon This preview shows pages 6–9. Sign up to view the full content.

View Full Document Right Arrow Icon
5Much of this section comes from or has been stimulated by two seminal essays by Thomas Schelling (1961,1966).
Image of page 6

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
(hlimifliL.,:..:Va::.:/:::.ue=-- _____________________ ...o:l=23 il~lccment altematives. But, making a binding, credible, communi- (¡Hed commitment is a primary tactic for such persuasion. C:ommitment tactics are most easily explained in extremely sim- ple. intentionally artificial situations, but bear with uso The ability to make commitments, albeit much more subtly, is equally important in \,:omplex bargains of virtually all types as we shalllater illustrate. Let's begin with the simplest possible situation: a distributive bar- ¡¿¡¡ín in which all reservation values are commonly known. Suppose ! hat a buyer and a seller are bargaining about the price of a house; (hey will never see each other again. For example. the buyer and the \cller both know that the seller has another bllyer for $.240,000 and that the buyer has found an equivalent house for sale at $260.&00. rhe bargaining range or set thus runs from $240,000 to $260,000. Figure 6.3a illustrates the possible negotiated agreements. Here, daiming value mean s getting a better price for onself. Similarly, consider two equally senior law partners trying to de- cide which one gets the prestigious comer office overlooking the bay. Either Cadwalader or Botts will get the office if they can agree, but if they cannot, it will go to Stimson, an annoyingly aggressive junior partner. Because both senior partners want to maintain the tradi- lional privileges and rewards for seniority and performance and be- cause both detest Stimson, each prefers that either one take the office rather than let it faH to the upstart. Figure 6.4a illustrates the values each party places on each of the two possible negotiated outcomes. Because Cadwalader is a litigator and Botts is a tax man, they have a. Owner's reservation "- val~e ~E $235,000 $240,000 Price of the House Outcomes made worse Buyer's than $260,000 for Buyer as / Buyer's reservation j value l $265,000 $260,000 reservation '- ....... ~ ~ reservation Owner's commitment a result of Buyer's commitment / Buyer's value -- ........ _ ~ ..... ----- ~ value b I E J:"nf((:íf:fff:~;fnf(ffY'f.':>ffffr(~ I . $235,000 ) )))) ))) )) )))~ $265,000 $240,000 $245,000 $260,000 Price of the House FIGURE 6.3: The Bargaining Set Before and After the House Buyen Commitment
Image of page 7
124 a. Value to 80tts / / Botts gets office B Cadwalader gets office / C Value to Cadwalader Stimson get5 office b. B Value to 80tts / Stimson gets office Negotiation Analysis Botts get5 office (Cadwalader, due to his commitment, now prefers that Stimson get the office rather than 80tts) / cadwalader gets office C Value to Cadwalader FIGURE 6.4: The Bargaining Set Over Who Gets the Office Before and After Cadwalader Makes a Commitment no other real involvement and thus neither has a means to compen- sate the other for not taking the office. For either senior partner, suc- cessfully c1aiming value means getting the office for himself.
Image of page 8

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern