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  • Now, when we look at distributive

    now when we look at distributive bargaining what do we see in distributed

  • bargaining, what do we see? In

    bargaining we see that you have basically like a scale here let me show

  • distributive bargaining, we see that you

    you here

  • have, basically, like a scale here. (Let me

    not enough they're here maybe about here we go over to my monitor here

  • show you here. Nope, not there. Here

    yeah that's nice lips turned off my screen there we go

  • may be, about here. Here we go. Let me go on

    alright so we have a scale so on this scale i put a little picture of a pizza

  • my monitor here. That's nice. Oops, turned off

    my pizza because remember friend Jane were arguing about the pizza right now

  • my screen. okay there we go.) All right, so we

    why is Pete's a good example of this well on the scale you see if one side

  • have a scale. So on this scale, I put a

    goes up the other side goes down if one side goes down the other side goes up

  • little picture of a pizza. Now, why pizza?

    that's distributed bargaining anytime this side goes up the other side goes

  • Because remember Fred and Jane were

    down one side wins the other side loses when one side loses the other side wins

  • arguing about the pizza, right? Now why is

    so you win I lose I win you lose

  • pizza good example of this? Well, on the

    so that's what distributive bargaining is both sides are in direct conflict and

  • scale, you see, if one side goes up the

    there's really not a lot you can do to change that the resources are fixed

  • other side goes down. If one side goes

    what does it mean to be fixed just like in this picture here it's a pizza

  • down, the other side goes up. That's

    it's around pizza there's no more pizza that's it we cannot go buy more

  • distributive bargaining. Anytime, this

    there's no more we gotta split up this pizza if you get one piece I get one

  • side goes up, the other side goes down.

    piece less if I get one piece you get one piece less so in the case of Jane

  • What one side wins, the other side loses.

    and Fred that was extremely have one little timepiece but same thing if they

  • What one side loses, the other side wins.

    cut it in half one person gets half the other person gets gets half would that

  • So you win, I lose. I win, you lose. So

    be okay well no because friend Jane want to be fooled they want to eat enough so

  • that's what distributive bargaining is.

    that they're not hungry and half is not enough so they both want to eat the

  • Both sides are in direct conflict, and

    whole piece

  • there's really not a lot you can do to

    in any case Fred once more and Jane once more they both want more

  • change that. The resources are fixed. What

    so someone is going to have to win and somebody's gonna have to lose and you

  • does it mean to be fixed? Just like in

    say well professor warden what if they just cut the piece in half and their

  • this picture, here. It's a pizza. It's a

    brother little bit happy is not good

  • round pizza. There's no more pizza. That's

    I mean yeah they still might be hungry but at least Fred gets a little bit and

  • it. We cannot go buy more. There's no more.

    Jane gets a little bit and the answer to that is in that case yes you're right

  • We gotta split up this pizza. If you get

    Fred will get a little bit and Jane will get a little bit and Fred will be a

  • one piece, I get one piece less. If I get

    little bit less hungry and Jane will be a little bit less hungry but in this way

  • one piece, you get one piece less. So in

    they're both still hungry so they both lose

  • the case of Jane and Fred, that was

    so you thinking win-win

  • extreme. They had only one little tiny piece,

    it's not so easy just cutting something in half does not mean win-win

  • but same thing. If I cut it in half, one

    that just means i have get half of what i want which is the same as losing right

  • person gets half, the other person gets

    it's the same as losing and distributive bargaining both sides do not want to

  • half. Would that be okay? Well, no.

    lose and later when we study win-win both sides don't want to lose either

  • Because Fred and Jane want to be full. They

    it's not just cutting something in half that is not the way it works so in this

  • want to eat enough, so that they are not

    case I use the scale to show one side goes up one side goes down there is no

  • hungry.

    way to stop it with the pizza if you get something I get something less and then

  • And half is not enough, so they both want

    Fred in Jane's case a very small amount so that they're both going to end up

  • to eat the whole piece. In any case, Fred

    being hungry no matter what we do

  • wants more, and Jane once more. They both

    ok so I think I kind of made the point they're clear

  • want more, so someone is going to have to

    for the buyer distributive negotiation begins with what the best deal is the

  • win, and somebody's going to have to lose.

    target . now let's begin looking at this very very carefully step by step because

  • And you say, "Well, Professor Warden, what

    I want you to remember this because it's really key idea right

  • if they just cut the pizza in half and

    very very important so if you're the buyer a distributive negotiation begins

  • their both are a little bit happy, isn't

    with the best deal which means getting the lowest price right i want to buy at

  • that good? I mean, yeah, they still might

    the lowest price

  • be hungry but at least Fred gets a

    ok so i want to buy this cup and I want to get the lowest price this cup cost

  • little bit, and Jane gets a little bit."

    $100 then i would like to get less than 100 and lower is better right if I'm the

  • And the answer to that is, in that case,

    buyer so the target . is the best deal and the worst deal is still acceptable

  • yes, you're right. Fred will get a little

    that's called the resistance . so let's say this cup here this cup maybe the

  • bit, and Jane will get a little bit, and

    retail price the sticker price is 100 ok whatever it doesn't really matter to me

  • Fred will be a little bit less hungry,

    i have my price so for me what is my target price well if i could pay 50 that

  • and Jane will be a little bit less

    is what i would like to pay of course i'd like to pay zero right but remember

  • hungry. But in this way, they're both

    what we talked about in the previous units that I need to have one is my

  • still hungry, so they both lose. So

    target so in this case let's say my target is 50

  • thinking win-win, it's not so easy. Just

    ok now then I'm the buyer so i would like to go lower so 50 is my target

  • cutting something in half does not mean

    price that's my target . now how much does the price go up and I'm not gonna

  • win-win. That just means I get half

    buy fifties what I will when i'm targeting target . of course you could

  • of what I want, which is the same as

    be lower than 50 i'm happy to that's fine right but 50 is my target now how

  • losing, right? It's the same as losing, and

    much higher does the price go and I'm just not going to buy it if it goes

  • in distributive bargaining both sides do

    higher in that case let's say that my upper price my resistance . i will not I

  • not want to lose. And later, when we study

    will not go past

  • win-win, both sides don't want to lose

    resistance . let's say that my resistance point is let's say a tok that

  • either. It's not just cutting something

    the sticker price maybe 100 we don't care that's the sticker price is not

  • in half. That is not the way it works. So

    important the retail price is not important to us if that retail prices

  • in this case, I use the scale to show one

    100 that is over my resistance . of 80 so if somebody tells me you must pay the

  • side goes up, one side goes down. There's

    price that's on there the sticker price the retail price the list price i'm

  • just no way to stop it. Or the pizza, if

    going to say no I don't want to spend that because that is over my resistance

  • you get something, I get something less,

    so we have two things here target and resistance I want you to remember so the

  • and in Fred an Jane's case, a very small

    resistance . for the buyer is the highest price i will pay higher than

  • amount. So they're both going to end

    that i will not buy right higher than that i will not buy the target . is the

  • up being hungry no matter what we do.

    desired price for me 50 anything beyond the resistance . cannot be accepted 80

  • Okay. So I think I kind of made the point

    if it's 81 dollars i will not accept if it's 82 dollars i will not accept its

  • there clear. For the buyer, a distributive

    ninety dollars no it's $100 know if it's $79 then yes I can accept that that

  • negotiation begins with what the best

    doesn't mean i will accept it but I can accept that if it's eighty dollars can I

  • deal is-- the target point. Now, let's begin

    accept that

  • looking at this very, very carefully, step

    yes that's my that is my actual resistance . right but 81 know both the

  • by step, because I want you to remember

    target . and the resistance . our secret information that you should not tell the

  • this, because it's a really key idea, right?

    seller here we get into the next important . in negotiation and that is

  • very, very important. So if you're the

    this idea of secret information so this is the cup i want to buy this cup I want

  • buyer, a distributive negotiation begins

    to buy it for 50 that's my target my target . the most i will pay is 80 so

  • with the best deal, which means getting

    5280 in here right

  • the lowest price, right? I want to buy at

    if you are going to sell to me and I told you sir i would like to buy that

  • the lowest price. OK. So I want to buy

    cup and i would like to buy that cup somewhere from 50 to 80 and what would

  • this cup,

    you say to me you would say oh no problem 80 and then what would I say

  • and I want to get the lowest price. This

    well 8000k 80 because eighty is still within my resistance right resistance .

  • cup costs one hundred dollars, and I

    target . resistance it's inside now that was pretty stupid of me to tell you that

  • would like to get less than 100, and

    right i should just tell you that 100 is way too much i'm not gonna spend that

  • lower is better, right? if I am the buyer.

    much and then you say well how much do you want and then maybe I begin by

  • So the target point is the best deal, and

    saying how much do I want maybe I begin by saying 40 and then we can work up

  • the worst deal is still acceptable.

    like that right

  • That's called the resistance point. So

    so we begin with two ideas here both of them are secret resistance . and target

  • let's say this cup here, this cup, maybe

    . please remember those are so awesomely up here right resistance . and target .

  • the retail price, the sticker price is

    okay secret information

  • 100, okay, whatever. It doesn't really

    you never want to tell the other side in this case the seller never want to tell

  • matter to me. I have my price. So for me,

    the seller

  • what is my target price? Well, if i could

    ok now then let's change perspective a little bit now the seller's a little bit

  • pay 50, that is what i would like to pay.

    different right

  • Of course, I'd like to pay zero, right? but

    if the seller is selling this cup then the seller must begin with a price right

  • remember what we talked about in the

    because he's selling at me

  • previous units? that i need to have what

    you cannot go and ask i would like to buy that cup how much is it and the

  • is my target. So in this case, let's say

    seller says hmm i don't know how much money do you have right that's that

  • my target is 50. OK. Now, then I'm the

    doesn't work right

  • buyer, so I would like to go lower, so 50

    no I don't think that works although there are some companies that do that

  • is my target price. That's my target

    kind of thing so if if you come to me you say mr. warden I'd like to buy that

  • point. Now, how much does the price go up

    cup and I say the price of this cup let me tell you how much money is in your

  • and I'm not going to buy? 50 is what I

    pocket right now I don't think that would be a good way to begin

  • what I'm targeting, target point. Ofcourse,

    what do we normally begin with normally you go to the cellar and there's a price

  • if it's lower than 50, I'm

    there a sticker price for a list price where we tail price and that price is

  • happy. That's fine, right? But 50 is my

    listed there where you can ask me and I tell you one hundred this cup is 100 so

  • target. Now, how much higher does the

    the seller must always begin the seller must always begin with some public

  • price go and I'm just not going to buy

    information and that public information is going to be the price so we call this

  • it if it goes higher? In that case, let's

    the sellers asking price

  • say that my upper price, my resistance

    the sellers asking price

  • point, I will not go past the

    you can now after the sellers asking price

  • resistance point. Let's say that my

    what comes next let's take a look at the start of negotiation one value is public

  • resistance point is... let's say 80, OK.

    everyone can see it while two values our secret

  • The sticker price maybe 100. We

    so the asking price

  • don't care. That sticker price is

    the selling price the retail price

  • not important, the retail price is not

    the list price this in fact is public to other values are secret but we'll talk

  • important to us. If that retail price is

    about that in a second so the first step is for the buyer to decide how much to

  • 100, that is over my resistance point of

    offer for the initial starting offer right so if i go to buy a cup and the

  • 80. So if somebody tells me you must pay

    list price is 100 I'm must decide what do I say to begin with do I say zero you

  • the price that's on there, the sticker

    should give me that cup for free

  • price, the retail price, the list price

    please well I can't start with i guess i could start with 0 but no one's gonna

  • I'm going to say no. I don't want to

    take me serious right so what do I begin with that's going to be the opening or

  • spend that because that is over my

    first offer the first offer needs to be lower than the target remember my target

  • resistance. So we have two things here:

    right member my target my target was 50 since the seller will try to raise the

  • target and resistance. I want you to

    price the seller will always try to make the price go up so the buyer should

  • remember.

    begin under the target of my target is 50 i would like to get 50 how do i get

  • So the resistance point for the buyer is

    50 i must begin below 50 i'll give you 40 so here we have this little chart I

  • the highest price i will pay. Higher than

    like this a lot

  • that, I will not buy, right? Higher than

    we can see on this graph here on this line we have three things so far on the

  • that, i will not buy. The target point is

    right side we have the buyers resistance . that is I will not spend more than

  • the desired price for me, 50. Anything

    this in my case the example was 80 will not spend more than 80

  • beyond the resistance point cannot be

    then you have the buyers target . in my case was 54 the cup so i will spend more

  • accepted. 80, if it's 81 dollars, I will

    olive oil definitely spend less than this i'm happy to spend less

  • not accept. If it's 82 dollars, I will not

    the question is though what do I want to get I wanted to get 80 and then we have

  • accept it. If it's ninety dollars, no. If 143 00:07:07,860 --> 00:07:15,569 it's one hundred dollars, no. If it's

    the first offer so maybe that begin my offer down around 40 and then in this

  • $79, then yes. I can accept that. That

    Charlie we have a different example so we have 12,000 is the buyers resistance

  • doesn't mean I will accept it, but I can

    . more than 12,000 too much he wants to get 9000 so where does he begin begins

  • accept that. If it's eighty dollars, can I

    down around 7,500 and the one more piece of information there is what it's the

  • accept that? Yes, that's my, that is my

    sellers asking price that's public information isn't it the sellers asking

  • actual resistance point, right? but 81?

    price

  • no. Both the target point and the

    ok so i really like you to look carefully at this

  • resistance point are secret information

    oops they're going to my screen again very sensitive the screen is

  • that you should not tell the seller. Now,

    what you look very careful in your book at this and begin to understand the

  • here, we get into the next important

    difference between the buyer and the seller i think it's easy for you to

  • point in negotiation. And that is this

    understand I think use you do it everyday you understand it but the

  • idea of secret information. So this is

    problem is i want you to really see that this information has to stay secret

  • the cup Ii want to buy. This cup I want to

    you really must think what is my target we talked about this last time didn't we

  • buy it for 50. That's my target, my target

    what is it that is my target how do I decide if i win if I lose

  • point, the most i will pay is 80. So 50 to

    how do i decided to do a good job for a bad job you have your target clear your

  • 80 in here, right? If you are going to

    resistance right so your target to your resistance if the price keeps going up

  • sell to me, and I told you, "Sir I would

    to your resistance

  • like to buy that cup, and I would like to

    well then that's not so good for you but after some point that resistance . you

  • buy that cup somewhere from 50 to 80.." And

    will not buy at all so this range here must a secret

  • what would you say to me? You would say,

    if the buyers first offer is too low for the seller then the seller will not want

  • "Oh, no problem, 80." And then what would I

    to sell so now we begin to look at this

  • say? "Well, 80 OK." 80 because 80 is still

    how do you begin you begin lower than your target how much lower how much

  • within my resistance, right? Resistance

    lower and my answer is well if you go too low the buyer will say huh

  • point, target point, resistance, it's

    that is just solo forget it I don't want to talk to you right you don't want to

  • inside. Now, that was pretty stupid of me

    go that low but you don't want to go over your target

  • to tell you that, right? I should just

    this means the first offer must be higher than the seller's resistance . ah

  • tell you that 100 is way too much. I'm

    so now we bring in the cellars resistance . remember the buyers

  • not going to

    resistance . that is the highest price the buyer will pay higher than that is

  • spend that much, and then you say well

    too high

  • how much do you want? and then maybe I

    what about the seller's resistance . well the seller is different the seller

  • begin by saying how much do I want. Maybe

    would like the price to go up and up and up the buyer would like the price to go

  • I begin by saying 40, and then we can

    down and down and down so for this seller if the price goes too low

  • work up like that, right? So we begin with

    this seller will lose money so the seller has a resistance . also what is

  • two ideas here, both of them are secret.

    that that's the lowest price the seller will sell for

  • Resistance point and target point-- please

    however this lowest price the seller will sell for its secret it secret

  • remember those. Those are so awesomely up

    he's not going to tell you what it is I mean he may say that he knows he may

  • here, right? Resistance point and target

    tell you something but it will not necessarily be true so this is the

  • point. Okay. Secret information-- you never

    seller's resistance .

  • want to tell the other side, in this case,

    and for the seller's resistance . and the buyers resistance . they're apart

  • the seller. You never want to tell the

    they are not together I mean usually they be a part if they're together

  • seller. Okay, now then let's change

    there's no negotiation everything is already agreed upon

  • perspective a little bit. Now the seller

    so they are apart now this area between the two is what we call the negotiations

  • is a little bit different, right? If the

    own the bargaining range

  • seller is selling this cup, then the

    let's take a look at this slide here very quickly so let's take a look at the

  • seller must begin with a price, right?

    buyers view if the price is too low for this seller he or she will walk away

  • Because he's selling it, I mean you

    from the negotiation if the price is too high for the buyer he or she will walk

  • cannot go and ask, "I would like to buy

    away from the negotiation look at this picture so if you look at the very

  • that cup. How much is it?" and the seller

    bottom that's called the bargaining range the bargaining range the

  • says, "Hmm. I don't know. How much money do

    bargaining range meaning we can have the price go all the way down in this

  • you have?" Right? That doesn't work,

    example to 7,000 or the price go all the way up to 12,000 so seven thousand

  • right? No, I don't think that works,

    twelve thousand is the bargaining range lower than 7,000 if the price goes under

  • although there are some companies that

    7,000 guess what that price is too low for the seller that price is too low for

  • do that kind of thing. So if you come to

    the seller that means that buyers offer is too low but this too low mean it

  • me you say, "Mr. warden, I'd like to buy

    means the seller just says nope I don't want to talk to you

  • that cup." And I say, "Hmm.. the price of this

    negotiation over how about the other end 12,000 can the price go over 12,000 know

  • cup, let me tell you.. How much money is in

    why because the prices over 12,000 that price is too high for the buyer too high

  • your pocket right now?" I don't think that

    for the buyer that means the seller's offer is too high

  • would be a good way to begin. What do we

    the seller wants too much the seller wants the price too high a buyer cannot

  • normally begin with? Normally, you go to

    agree so those are the two resistance points sellers resistance . and the

  • the seller, and there's a price there, a

    buyers resistance . if you go beyond these there's no deal

  • sticker price or a list price or retail

    so we must stay within these the problem is the buyers resistance . is secret

  • price, and that price is listed there. Or

    information and the seller's resistance . is secret information so we need to

  • you can ask me and I tell you 100. This

    guess where they are what we have inside there and 9000 we have the buyers target

  • cup is 100. So the seller must always

    right that's what he would like to get and we also have the sellers asking

  • begin. The seller must always begin with

    price

  • some public information, and that public

    that's the price he would like to get that's not secret that's the one piece

  • information is going to be the price.

    of information that's public not secret

  • So we call this the seller's asking price,

    yeah

  • the sellers asking price. OK. Now, after

    each side must have their own goals clear and guess what the other side

  • the seller is asking price what comes

    secrets are now this is another thing that I want you to think about in

  • next? Let's take a look. "At the start of

    negotiation remember today I'm emphasizing you want to win

  • the negotiation, one value is public

    how do you win you win by winning where you win by making the other side lose

  • everyone can see it. While two values are

    same thing

  • secret." So the asking price, the selling

    another key point today which sounds again it sounds not nice

  • price, the retail price, the list price

    and that is you want to keep your information secret i want to keep my

  • this in fact is public. Two other values

    information secret but you want to get the other side secret information out

  • or secret, but we'll talk about that in a

    how do you get it

  • second. So the first step is for the

    there are many ways and none of them are too good

  • buyer to decide how much to offer or the

    they're all kind of trick the other side fool the other side make them say

  • initial starting offer, right? So if i go

    something they don't mean to say get them confused get that information of

  • to buy the cup, and the list price is 100,

    course they don't want to give it to you so you need to get it somehow so that's

  • I must decide what do I say to begin

    how you can win

  • with. Do I say 0? "You should give me that

    how do you win keep your information secret and get the other side's

  • cup for free, please." Well, I can't start

    information out get their secret information to not be secret anymore

  • with zero. I guess I could start with 0, but no

    I know you're saying oh professor warden this also terrible we should be nice to

  • one's going to take me serious, right? So

    each other and I'm saying okay you can do that and you will be the one who

  • what do I begin with? That's going to be

    loses in a negotiation the buyers first offer must not be below the seller's

  • the opening or first offer. The first

    resistance . so the buyer wants to begin low price right

  • offer needs to be lower than the target.

    how low well I don't know but not too low because it's too low then game over

  • Remember my target, right? Remember my

    higher than the seller's target . the seller will agree to the offer quickly

  • target? My target was 50. Since the seller

    so if you go

  • will try to raise the price, the seller

    hi if you go high then the seller may say yep no problem and that always

  • will always try to make the price go up.

    happens doesn't it

  • So the buyer should begin under the

    that always happens when you go somewhere and you say something like I'd

  • target. If my target is 50, I would like

    like to buy back up

  • to get 50. How do I get 50? I must begin

    how much is it he says it's one hundred dollars and I say well i'll give you 90

  • below 50. I say i'll give you 40. So here

    minutes okay

  • we have this little chart. I like this a

    indian what do I said oh 90 why did I agree so fast I could have got it for 80

  • lot. We can see, on this graph here, on

    right so if you go high high enough right then you're going to be past that

  • this line, we have three things so far. On

    target of the past the target of the seller the seller will happy to give it

  • the right side, we have the buyers

    to use over the target no problem