Overview
This lecture reviewed the Appleton-Baker negotiation simulation, focusing on concepts like the bargaining zone, information asymmetry, anchoring, and alternatives in negotiation.
Simulation Recap: Appleton-Baker
- The simulation involves a property sale between the Appletons (sellers) and Bakers (buyers).
- The Appletons have a $5,000 offer from another buyer and seek a higher price.
- The Bakers have $20,000 from an inheritance to spend on the property.
- The zone of possible agreement (ZOPA) is the overlap between what the Appletons will accept and what the Bakers will pay ($5,000–$20,000).
Key Concepts in Negotiation
- The ZOPA is the financial overlap where agreement is possible.
- Negotiated deals often settle near the midpoint of the ZOPA.
- Information asymmetry occurs when only one party knows all relevant facts (e.g., the $5,000 offer known only to the Appletons).
- Anchoring is the use of initial offers to set expectations and influence negotiation outcomes.
Simulation Results & Patterns
- Most deals favored the Bakers, with sale prices often below the midpoint.
- Appletons tended to accept lower offers due to their knowledge of the $5,000 offer.
- Strong initial anchors from the Appletons led to better outcomes for them.
- Deals outside the ZOPA (e.g., below $5,000 or above $20,000) are poor choices and should be rejected.
Alternatives and Leverage
- Best Alternative to a Negotiated Agreement (BATNA) is your next-best option if talks fail.
- Having a strong BATNA increases negotiating leverage.
- The Worst Alternative to a Negotiated Agreement (WATNA) is the outcome if you walk away with nothing better.
Ethics and Information
- Deception can occur in negotiations via inflated or false claims.
- Trust but verify: always request documentation for claims made by the other party.
- Be critical of information provided by your counterpart.
Key Terms & Definitions
- Zone of Possible Agreement (ZOPA) — The range where both parties' acceptable outcomes overlap.
- Information Asymmetry — A situation where one party has more or better information than the other.
- Anchoring — The strategy of making the first offer to set a reference point in negotiations.
- BATNA — Best Alternative to a Negotiated Agreement; your fallback option.
- WATNA — Worst Alternative to a Negotiated Agreement; the least desirable fallback.
Action Items / Next Steps
- Read assigned materials on negotiation strategies for next week.
- Prepare for the upcoming simulation using insights from the Appleton-Baker exercise.