flashcards

Question 1

What is a BATNA?

Answer 1

best alternative to a negotiated agreement.

Question 2

four steps for assessing the BATNA

Answer 2

1. list your alternatives
2. evaluate your alternatives
3. establish your BATNA
4. calculate your reservation price

Question 3

what is the black knight strategy?

Answer 3

my way or fight

Question 4

what is the white dove strategy?

Answer 4

peace at all costs

Question 5

what is the walkaway?

Answer 5

the point at which you loose interest in a deal

Question 6

what is the ZOPA?

Answer 6

zone of potential agreement.

Question 7

what differences create value?

Answer 7

differences in valuations
differences in risk attitude
differences in time preference
differences in capabilities
differences in expectations

Question 8

what is positional bargaining?

Answer 8

people locking themselves into position that they cannot see a way out

Question 9

how to avoid positional bargaining

Answer 9

avoid taking hard stands (unless it really is your outer limit)
early on, talk about your numbers in terms of “maybe” - that leaves the door open to new issues

Question 10

when should you make the first offer

Answer 10

make your offer when you are confident of the value of their walkaway

Question 11

what characterizes a good first offer?

Answer 11

you want to make an offer that really makes them have to stretch to meet you. The ideal proposal is one that is not accepted nor rejected too quickly.

Question 12

4 steps of the formal analysis of decisions

Answer 12

• decision structuring
• assessment and information gathering
• evaluation of the decision problem
• sensitivity analysis

Question 13

how to calculate which decision leads to the highes profit?

Answer 13

folding back the decision tree

Question 14

decision biases

Answer 14

• forgetting non-monetary consequences
• not goot at estimating probabilities

Question 15

auction formats: how bids are collected

Answer 15

• sealed bid
• ascending bid
• descending bid

Question 16

bidders valuation types

Answer 16

• common value
• private value

Question 17

best bid in a second price, sealed bid auction

Answer 17

best bid = bidder’s valuation

Question 18

what is the assumption the black knight and the white dove have and how to change the mental mode?

Answer 18

black knight and white dove assume that negotiation is combat. The simple observation that negotiation is joint decision making (because getting a deal requires that both sides feel they win), leads to a better way of negotiation.

Question 19

Fundamental question to prepare by

Answer 19

What is the value proposition in this negotiation? What is going to drive the deal?

Question 20

examples of non-monetary consequences that should be included in the payoff of the model

Answer 20

• reputation
• future projects.

Question 21

Questions to think about in preparing to negotiate?

Answer 21

• What is your BATNA-Walkaway?
• What is theirs?
• ZOPA: What is you claiming argument?

Question 22

What is the aspiration?

Answer 22

What you hope you get

Question 23

example for common value bidder valuation

Answer 23

oil drilling rights

Question 24

example for private value bidder valuation

Answer 24

home furnishings

Question 25

bidder’s behavior in a Dutch Auction

Answer 25

Bid Shaving (as in First-Price, Sealed Bid Auction)

Question 26

bidder’s behavior in Second Price Auction

Answer 26

bid your valuation

Question 27

What is sniping

Answer 27

in a timed online auction, the action of placing a bid likely to exceed the current highes bid as late as possible - usually seconds before the end of the auction - giving other bidders no time to outbid the sniper.

Question 28

reasons for sniping

Answer 28

in common value auctions: sniping can occur to protect information (other bidders watch to see what the experts are bidding on and then bid on those items themselves: experts can snipe to prevent other from cashing in on their expertise)
in private value auction: as implicit collusion, mitigate price wars. bidding high at last minute and letting chance determine outcome is better for both players than bidding early and precipitating a bidding war.
as best response to naive incremental bidding, prevent “just-want-to-win” bids ( a lot of people will actually bid again if they find they have been outbid, which can quickly lead to a bidding war. -> result: someone probably paid more than they had to for that item -> sniping can avoid bidding wars.