All right, everyone. Um, great job this week, uh, getting through your simulation and, uh, posting your reflection videos. I had a lot of a lot of fun listening to your experiences and learning from from you. Uh, and I I recognize that this is kind of like we're throwing you into the deep end of the pool without any instruction. Um, and letting you try to figure out what to do. Um, and that's kind of the point. Um, I want you all to try things before you learn about them. uh in part because you actually will build more uh more stronger connections between your experiences and the material uh that come in the second half of the week. So uh if you felt confused, you felt uneasy, you felt apprehensive, that's totally fine, totally normal. uh and kind of the point. Um and part of that discomfort creates the conditions for you all to read the material that g that you're going to look at this week or that you've already started looking at uh and then starts to sort of prime you for the the simulations coming in future weeks um where uh where you're going to be more open to learn now that you kind of have this idea that you're going to get thrown at a simulation before you have any uh instructions. Uh so with that said, let's take a quick look at uh the the outcomes of this uh this very simple simulation, the Appleton Baker simulation. Uh just a quick reminder, it should all be pretty fresh in your minds. This is a property transaction between the uh Appletons and the Bakers. The Appletons are selling their home, which sits on lot 43. The Appletons also own the adjoining lot 42 uh and they are trying to sell it to their longtime neighbors, the Bakers. Um this simulation is is very simple. It's and it's stripped down and it's it's really intended to demonstrate uh one uh very simple feature of of of some negotiations and that's the idea of the the bargaining zone. um also known as the zone of possible agreement. Um and it's helpful to understand this in in terms of a a range of overlap um between two positions between two sides, right? So the zone of possible agreement is this overlap in uh quantitative or economic value or financial value uh between what the bakers are willing to spend and what the Appleton are are are wanting to sell it for. Right? So that overlap is where an agreement might occur and it's the job of the agents in this case or the negotiators to find a price within that uh overlapping range of value uh that satisfies their clients. Right? So if we look at this uh as a number line, right? the Appletons have an offer for $5,000 and they would theoretically be willing to accept any um amount of money up to infinity, right? Like they would want as much money as they could possibly get, but they wouldn't want anything less than what they currently have offered from their new buyers. That's the the $5,000. Uh the bakers on the other hand have uh a $20,000 uh inheritance and so they would be willing to to to buy the property for anything less than $20,000 assuming uh um that they would be willing to go all the way down to zero, right? They would they would take it for free if they could. Um and then they pocket the 20k uh totally, right? So the idea here is that when you look at the the these two positions, the Appleton's here on the left and the Bakers here on the right, uh there is this overlap between the floor of the Bakers at 5,000, the ceiling or sorry, the floor of the Appleton's at 5,000 and the ceiling of the Bakers at 20. And somewhere in here is uh a negotiated agreement in which both sides would actually come out ahead financially, right? Uh so there's a a a deal here that works uh for for both sides. Uh and if we were to do this like in a simulation or if we were to do this hundreds of thousands of time, the law of averages would say that we would probably end up with a normally distributed set of results. uh and that that median and mean result would be about $12,500 which is the midpoint between the Appleton's 5000 uh and the Baker's 20, right? So just throw it out there enough times people are going to sort of haggle their way into this this splitting the difference midpoint. Um but there's a complicating factor uh in this simulation which is that the bakers aren't aware that the Appletons have an offer for the for the parcel. They aren't aware that the Appletons uh have $5,000 as an alternative to to selling it to the bakers. Um the bakers do know that the Appletons originally paid $7,000 for it. So what that effectively does is it creates a bit of an information asymmetry. The the Appletons know a little bit more than the bakers do. Um and that has the effect of changing that bargaining zone that that that overlap, right? at least from the perspective of the bakers, right? The bakers now think that the midpoint is a little bit higher, not 12,500, but the midpoint is actually 135. And so if you're thinking about this from the baker's perspective and you're thinking about, you know, what kinds of offers you might make, you might start with this simple point of if we end up in the middle on average 7,000 between$7,000 and 20,000 is 135. So my offer to buy the property would want to be, you know, on the south end. I can't go below seven because that's what they paid for it. That would might be insulting, but I could go in the 8 9,000 range as a way of maybe moving uh moving them toward uh toward giving me more more value, right? Uh so in terms of that, how did how did you all uh do? Um so I'm just going to run through the results. Uh Alana and Leland uh agreed on a $6,000 sales price um which represents a $1,000 gain to the Bakers and a $14,000 gain to sorry $1,000 gain to the Appletons and a $14,000 gain to the Baker. So when you look at it just in those terms, both sides come out ahead. But when you look at it in terms of where they are relative to that midpoint, um the Appletons aren't doing so great, right? the Appleton's gave away about $7,500 in value that they maybe could have claimed and uh and uh um with respect to the the bargaining range they know about the five to 20 uh and 6,500 if you if you go with that 7,000 starting point instead of the 5,000 starting point. Um Brook and BJ $14,000 is a sale price. The Appleton's pocket about $9,000 extra uh and the Bakers about six. Uh so in terms of where you know sits in that midpoint, this is maybe a fairer deal for both sides where uh the Appleton's we're were within 500 of that uh that that um uh that 12,500 midpoint and about 1500 of the 135 midpoint. Uh Joel and Gemma were at 155. That's a $10,000 roughly $10,000 gain to the Appletons, $4,500 gain to the Bakers. Um, little bit above the midpoint. So, this one's favoring the Appletons a bit more. Uh, Ton and EB were at 9,500. So, it's a $4,500 gain to the Appletons and a $10,500 gain to the Bakers. Uh, this one's a little bit more in favor of the Bakers. 30 3,0004,000 on the left side of that midpoint. Uh Lily, excuse me, Lilia Tupu and uh Emmy were at 9,000 and4 were $9,000 sale price. The Appleton's come out about $4,000 ahead. Uh the Bakers about 11,000. Uh again, this one's very similar to Ton and Ebies where it's on the left side of that bid point. Um pretty pretty pretty similar deal. Uh Matteo and Logan, same at 9,000. Uh Roland and Bargo were at 10,000. Uh, so this is in that same 9,000 10,000 range where it's getting in the the the realm of moving towards that uh that midpoint, but it still favors the Bakers pretty pretty strongly. Uh Brad and Jennifer 8,500 kind of in that same range. Uh Seth and uh Mia Thor were at 6,000. Uh so this one's similar to Alana and Leland's identical actually. Uh, and then Amy and Candace were at 12,000, which is right in the realm of uh Brooke and BJ's deal. Um, whereas this one's probably the closest to being equal. Um, and I might have done some math wrong on that one. Um, so overall, um, if we're to look at this kind of as a histogram, you can see there's a a little bit of a right-hand skew, right? there's more uh groups are settling on price points that favor the Bakertons. Sorry, the Bakertons, the Bakers, right? So, if we look at this the the midpoint here at 125, anything to the left of that point are deals that are better for the Bakers. Uh anything to the right are going to be deals that are better for the Appletons. Uh so, really there's the majority of the the results are are on the left hand side. So, they're benefiting the Bakers. So, compare this to what I said at the outset, which is that most of the time when you have these um zero sum or positional bargaining situations, uh the outcome's usually in the midpoint, right? It's halfway between. Why is it that the deals tend to be better for the bakers? Um and I've run this simulation uh probably a couple hundred times now, maybe more with students uh over the years here, and it's almost always the same where most of the deals are are tending toward being better for the bakers. A lot of it has to do with that $5,000 offer that the Appletons know about and the Bakers don't. The the that information um kind of primes the Appletons to be willing to accept a first lower offer rather than probing the bakers and asking questions about how or what they might have to spend um and working toward moving that um that offer more towards that midpoint. So, the Bakers seem to be much more willing to accept, sorry, excuse me, the Appleton seem to be much more willing to accept a lower offer um because they have that additional uh anchor uh of $5,000 because they have that offer from their new from the buyer of their home. Um so, just what are the what are the takeaways here? Um this is an example of what is known as positional bargaining. Each side has a position. The Appletons want more than five or 7,000 and the Bakers want to spend less than 20. Uh that's their position. That's where their starting point and they're going to try to negotiate a deal in the middle. Uh this is different from what we'll learn about in future simulations, which is this interestbased negotiation. Um we can use interestbased negotiation techniques, which we'll get to uh in positional bargaining situations. They can help create value, help people understand where the value is to help them accept different kinds of offers. But really fundamentally, this simulation is about these two fixed positions and how do we negotiate an agreement uh somewhere in the middle. Uh this is also uh a good point to talk about this this idea of what are known as alternatives to a negotiated agreement. Now, your class didn't do this, but I've had classes in the past where the bakers will be willing to buy the property for more than $20,000 and the Appletons will be willing to sell the property for less than five. These are agreements that shouldn't be made. The Appleton and the Bakers in those situations just should say no and walk away, right? Because they have better alternatives, right? So, the idea is is that there are there are different kinds of atmas this these alternatives to the negotiated agreement. Uh there's a best alternative to a negotiated agreement that is what can I do if I don't take this deal? Can I do better than what I've got here? Uh so for instance, if the bakers were like, we'll give you 2,000. Well, the Appletons would be like, no, we've got $5,000 already. We have a better alternative. We're going to take that and walk, right? Uh versus a a Watna, which is the the worst alternative to a negotiated agreement. Uh and the idea is is that you would want to take a deal in a situation where by walking away, you would end up with something worse. For instance, uh the bakers might be willing to spend a little bit more uh if, as I've heard from some of your reflection videos, if they were convinced, for instance, that the new neighbors were going to be loud and obnoxious and yada yada yada and this would give them a little bit of buffer from from them. Right? So using your alternatives, creating these scenarios both in discussions with your counterpart but also in your own mind as you prepare and thinking about what could I get if I didn't work with these folks is a useful tool for creating leverage. Right? This is a a classic instance, right? If I go to negotiate a raise with Dean Conan, I better have an offer from another university for more money, right? so that I've got a better alternative that I can show the dean and say, "Hey, see uh someone values me more, you should pay me more too." Right? So the idea is that you you you can get leverage in negotiations, especially in position positional bargaining situations by having a stronger better alternative. All right. Uh the other thing that this uh simulation is is meant to introduce and I've heard some of you mention this maybe not explicitly using this term but this is the idea of anchoring uh and it's the anchoring is both in our minds where we know the floor or the ceiling might be but also what we say first or what we say when we're asked how much we would be willing to pay or how much we want to we want to sell for. that first offer oftentimes creates the pivot point around around which the rest of the negotiation uh turns. So if I'm the Appletons and I say make an initial offer and say we want to sell a property for $40,000, which is I think one of the values that that one of the groups in this class did, that's a really strong high anchor. Now the bakers will never accept that because it's twice what they have to spend. But the bakers might say, "Oh, well, no, we're not going to do that at all." Or the Bakers might say, "That's unrealistic. Let's bring that down to say uh 15." Right? Maybe if the Bakers had gone first, the Bakers would have said something like nine, right? And the Appletons would have been willing to accept that. So you can see how the choice of where to put that first stake in the ground really can determine uh the subsequent counter offers and maybe ch changes the shape or the size of that bargaining zone, that range of overlap. Uh so it's really important to be thinking critically uh about where that anchor should be. You don't want it to be too strong. You don't want to say, "Oh, $100,000." You don't want it to be too small because you don't want to insult your counterpart. But it needs to be realistic and strong enough to move that midpoint in the direction that is going to benefit your side. And so the Appleton groups that I see that tend to overcome the um the limitations of having that sort of mental block of that $5,000 floor because of that that offer from the the buyers of the house. They tend to be a very have a very strong anchor. They tend to come out and say, "Oh, we want to sell it for 30,000 or we want to sell it for 18." they tend to go very very high ignoring that $5,000 is all they have right now. They tend to be a little bit more aggressive uh in that way. Whereas the the bakers in many of these simulations tend to be very good about setting anchors toward that $7,000 sale price purchase price because they know that the Appleton have already paid that much. And so they the the bakers have a bit of a uh tactical advantage because of the the way that the information is presented in this case and what it effectively does to the to the shape and nature the anchors that each side is willing to uh willing to offer uh sort of initially. Uh and then the other thing that I'll mention that I heard about in some of the simulations is what do we do about deceit or information asymmetries? Is it okay to lie? Is it okay to manufacture stories? And the question is is to what end and to what effect? Um you know I think I heard a story about uh one of the sides one of the the Appleton saying oh well somebody wants to buy the property. Now that's true but it was also untrue to say how much and to inflate the value of what was what has been purchased right and so you're you're leaning into uh that that information asymmetry using it to your advantage but using a bit of deception in order to create the appearance of scarcity. Now, in a competitive bargaining situation, this is a thing that will happen a lot. People will lie. People will mislead intentionally in order to gain an advantage. Um, how do you deal with that? One of the things is you have to ask questions. The other thing is is you have to stick to your objective, you know, criteria. What do we know? If you're the Bakers and you get someone saying, "Oh, we've got an offer for $15,000." Say, "Okay, I want I want to see it on paper." Right? To go back to my example from the uh the BATNA, if I go in to negotiate a salary increase with the dean, I better have a letter from another university, I better not just walk in. I'm not going to get away with just walking in and saying, "Oh, they want to pay me $500,000. I better have a letter that says it. I better have something to actually document it." So, you you can insist on on verification. You can insist on uh documentation. Um you don't have to accept what people are saying is true just because they said it. Uh so it's it's helpful to be um how do I want to say this? I don't want to say suspicious. I don't want to say skeptical. Um but it's but it's uh trust but verify, right? You want to actually trust people, but you also want make sure that you are uh verifying that what they're saying is actually true. Uh so those are some kind of takeaways that I got from your uh reflection videos and some of the things that uh that we've uh that I've learned about from the simulation and and talked about with the simulation. uh over the years. Um, but overall you all did a uh fantastic job and I'm looking forward to uh seeing what you all do in next week's simulation.