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