W1 - Fundamentals Flashcards
Opportunity cost, the cost of doing x by not doing y.
BATNA (Best Alternative to Negotiated Agreement)
Seller –> Minimum you are willing to receive
Buyer –> Maximum you are willing to pay
Reserve Price
The best price you can hope to receive
Target Price
Subtraction of Reserve Price (Buyer) - Reserve Price (Seller)
ZOPA (Zone of Possible Agreement)
Issue based on zero sum gain, what one wins the other loses
Distributive Issue
Issue that expands the pie when negotiating but once the pie is fully expanded the issue becomes distributive
Integrative Issue
No zero-sum negotiation. Every gain of mine is a gain of yours but not necessarily the same amount.
Compatible Issue
What issues to reveal and when?
1) Reveal integrative issues
2) Figure out the size of the pie before dividing it
3) Hide compatible issues in order to make exchanges
4) Reveal distributive issues
feeling unhappy when the other party accepts your first offer because you felt you could of gotten more.
Winner’s Curse
Presenting a number where people will base the negotiation from.
Anchoring and Adjustment Heuristic.
It leads people to settle on a figure closer to the presented earlier
Giving reasons to people for what they do that are logical and relevant.
Reasons Effect
Notion of Fairness 1 - value under consideration is split evenly among those who claim it
Equality Based rule
Notion of Fairness 2 - value under consideration is split in the same proportion to the input of people
Equity Based rule
Notion of Fairness 3 - the party that needs it the most gets the most.
Needs based rule
This concept helps solve dilemma of parties having different predictions about the future. They identify range of future happenings and they pre-specify obligations that each party will take upon those happenings.
Contingency Agreement
