Negotiation Flashcards
When is an auction efficient?
When there is Common Value and Total Information Transparency
Optimal Strategy for an English Auction?
Start late
Increase in increments
Stop when everybody stop
Expected price of an English Auction?
V2
Optimal strategy for a Dutch Auction?
Stopping point if a trade-off between amount paid and probability of winning
Expected price of a Dutch Auction
V1-something
Optimal strategy for a FPSBA
Tradeoff between amount and probability of winning
Expected price
V1-something
Optimal strategy for SPSBA
Your valuation
Expected price
V2
What auction to choose if you want information
SPSBA
What auction to choose if you want to avoid buyer collusion
FPSBA or (DA)
What auction to choose if you want to minimize transaction cost
EA or DA
What auction to choose if you want efficient allocation
EA
What auction to choose if you want to maximize expected price?
Revenue-Equivalence Theorem states that on average all four auctions yields the same price.
What are the Benchmark-Case Assumptions?
- Bidders are risk neutral
- IPV applies
- Bidders are symmetric
- Payment is a function of bids alone
- Number of bidders is exogenous
How to take advantage of risk-averse bidders in Auctions?
FPSBA
A main task of a negotiator?
Probe for additional information and eliminate question-marks
What is the purpose of a moderator offer?
An offer which should be acceptable to the other side and should allow both parties to quickly arrive at a fair deal.
What is the consequence of a moderate offer?
- Leaves money on the table
- Leaves little bargaining room
- Induces the other side to revise expectations
What is an boulwarian offer
A speific and extreme case of a moderate or reasonable offer.
Problems of a boulwarian offer?
Perceived as unfair? Excessive rigidity.
What is the purpose of an extreme offer?
To shake up the other side
What is the most efficient offer you can make?
A tough offer.
What is a tough offer?
An offer which is not acceptable, yet discussable. High end of the Fuzzy-range
When is is a good idea to move first?
Opportunity to anchor the negotiation if we have more expertise/information, or the opponent is ill-informed or confused.
How to react to an extreme offer?
- Answer with questions
- Interupt the negotiation, but leave the door open for later.
- Counter with an extreme offer
- React with some humor.
- Reverse the negotiation
- Apply the silence treatment.
What are the objectives concession patterns?
Find out the others side’s point of difference.
Manage our opponents beliefs about our reservation price
General rules of concession
- Move in small steps
- Move towards greater precision as we get a better handle on the others side RP.
- Think deeper and more for each concession
- Dont withdraw concession, unless they are labelled as tentative
- Give your counterpart a target to shoot for, by telling him what he cannot get.
What is integrative bargaining
When parties try to find mutually benefical agreements in a negotiation.
What are the negatives of arguments in negotiation
- Do not convince
- Irritate/Create resisitance
- Throw away information/Don’t listen
What is the concept of ‘signalling’
A way to convince the opposite party, hthat u are telling the truth.
Signals are actions that
1. Are costly for you to take
2. That the other side can see you taking
3. That are more costly if you are lying than if you are telling the truth.
To be credible, an offer has to be acceptable?
False.
What are the three main considerations for integrative bargaining
- What is the objective of the negotiation?
- What is our negotiation strategy?
3: What is the role of each member of the team
Two most important aspects in integrative negotiation
How to create value
How to claim value
What does the structural point of view say about single-handed negotiations vs package deals?
In single handed, it’s about capturing value.
This aspect is also present in package deals,. Try to always move to package deals; I.E. Salary negotiation –> Job negotiation
How can you create value in controversial issues?
- Create agendas with multiple issues
2. Create value due to our differences
What is the efficiency ratio?
Efficiency ratio:(△Benefit to other)/(△Cost to us)>1
What are some implementations to solve issues in integrative bargaining?
Quantify to monetary scenarios, propose multiple mini-packages, exercise pressure selectively with use of Efficiency Ratio.
What can you do if they are resistant to enlarging the agenda?
Induce the other side to move first. ‘Any other things you would like to have addressed’, and after put your own important issues in. If they don’t raise them themselves, put them on the table in the middle/end negotiation.
How do you implement a signalling strategy?
- Make sure their minds are ready to receive the signal: Tell what they want tot tell you. Send messages they approve of
- Send the signal
What are two general problems between two non-trusting parties
Screening problem (Lakeland’s Problem) and credibility problem (Walkenhorst problem)
What can you do to make the deal viable in a NO ZOPA?
Add additional variables into the equation and reverse the reservations prices, such that ZOPA exists again.
What is the objective of an opening offer
To stay in the game
How to take advantage of correlated values?
Allow valuations to converge –> English Auction
How to deal with valuation asymmetry in an Auction?
Make a FPSBA to hide asymmetries or artificially enhance it through discrimination
How to deal with information asymmetry in an Auction?
English auction or collect information about the object and make it available.
