Full Terms & Conditions of access and use can be found at
http://www.tandfonline.com/action/journalInformation?journalCode=vjeb20
Download by: [Universitas Maritim Raja Ali Haji] Date: 11 January 2016, At: 20:36
Journal of Education for Business
ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Let's Make a Deal: A Dynamic Exercise for
Practicing Negotiation Skills
Gerard Beenen & John E. Barbuto Jr.
To cite this article: Gerard Beenen & John E. Barbuto Jr. (2014) Let's Make a Deal: A Dynamic Exercise for Practicing Negotiation Skills, Journal of Education for Business, 89:3, 149-155, DOI: 10.1080/08832323.2013.794121
To link to this article: http://dx.doi.org/10.1080/08832323.2013.794121
Published online: 06 Mar 2014.
Submit your article to this journal
Article views: 404
View related articles
CopyrightC Taylor & Francis Group, LLC ISSN: 0883-2323 print / 1940-3356 online DOI: 10.1080/08832323.2013.794121
Let’s Make a Deal: A Dynamic Exercise
for Practicing Negotiation Skills
Gerard Beenen and John E. Barbuto, Jr.
California State University, Fullerton, California, USA
Because negotiation is among the most important skills for a manager to develop, activities that can foster its development are valuable for educators. The authors present an original exercise that introduces three key concepts in negotiation: best alternative to a negotiated agreement, distributive bargaining, and integrative bargaining. They review these concepts and present the exercise and its purpose, and execution, then debrief. A unique feature of the exercise is that instructors can configure dynamic buyer–seller dyads with varying distributions of power between parties. A pre- and posttest using four questions to assess learning with Master of Business Administration students and undergraduates suggest that the exercise is an effective teaching tool.
Keywords: classroom exercises, negotiation, role play
“Never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.”
—J. Paul Getty (cited in Branaghan, 2009, p. 136)
Effective managers know how to balance their own self-interests with the self-interests of the other party, which is what good negotiators do. Negotiation is “a process in which two or more parties seek agreement on what each shall give to, and take from, the other(s)” (Movius, 2008, p. 51). Negotiation skills are “at the core of the manager’s job” (Lax & Sebenius, 1986, p. 2), and a key component of managerial effective-ness (Munduate, Ganaza, Peiro, & Euwema, 1999) and career success (Melamed, 1996). Good negotiators can adjust more effectively to their new jobs (Davey & Arnold, 2000) are bet-ter at achieving work–family balance (Buzzanell & Meina, 2007), and are promoted faster (Fiona, 2008). Negotiation is a core topic in organizational behavior textbooks (e.g., Mc-Shane & Von Glinow, 2009; Robbins & Judge, 2010; Whet-ten & Cameron, 2011) and an important, though underrepre-sented, component of business school curriculum (Navarro,
Correspondence should be addressed to Gerard Beenen, California State University, Department of Management, 800 N. State College Boulevard, Fullerton, CA 92831, USA. E-mail: [email protected]
2007; Rubin & Dierdorff, 2009). Experiential learning using deal-making exercises is the best way to develop negotiation knowledge and skills (Lewicki, 1997).
Though a number of published negotiation exercises are available, most if not all of these do not give students experi-ence with dynamic power distributions between negotiators. For instance, published negotiation exercises provide direct exposure to Pareto efficiency (Ball, 1999), building self-confidence (Taylor, Mesmer-Magnus, & Burns, 2008), devel-oping critical thinking skills (Page & Mukherjee, 2007), and negotiating cross-culturally in an online context (Volkema & Rivers, 2008). This article provides an experiential exercise that introduces students to the fundamental concepts of best alternative to a negotiated agreement (BATNA), distributive bargaining, and integrative bargaining. A unique feature of the exercise is the instructor can create buyer–seller dyads with symmetrical and asymmetrical power to give students a dynamic experience with these concepts. The key lesson students take away from this exercise is that their BATNA in the negotiation, and the extent to which they anticipate fu-ture interactions with the other party, should influence their negotiation strategy.
In the rest of this article, we provide a background for understanding power in a negotiation is a function of BATNA. Next, we explain two rudimentary negotiation strategies—distributive and integrative bargaining. We then describe the purpose and audience for the exercise, instruc-tions for facilitating it, and processing guidelines to glean
150 G. BEENEN AND J. E. BARBUTO, JR.
key concepts practiced in the activity. Finally, we pro-vide preliminary indicators that the activity is effective at increasing students’ understanding of a BATNA, and dis-tributive and integrative bargaining strategies– indicating that it achieves its desired objective.
THEORETICAL BACKGROUND
Best Alternative to a Negotiated Agreement (BATNA)
A manager’s power in a negotiation is defined by the BATNA that he or she brings to the negotiating table (Bazerman & Neale, 1992). The BATNA is what negotiators are left with when they fail to reach a negotiated agreement. For example, a renter and landlord who fail to agree on lease terms will each be left with their BATNA. The renter’s BATNA may be buying or renting another home, or moving in with family or friends. The landlord’s BATNA may be finding another tenant, risking a rent-free period, or selling the property. The renter has a better BATNA and more power in the negotiation if affordable housing is abundant. The landlord has a better BATNA and more power in the negotiation if housing is scare and there are a lot of eager tenants. Negotiators should always keep in mind that expanding BATNA is an important goal because it increases power in the negotiation.
Distributive Bargaining Strategy
The most common strategy to which the uninformed nego-tiator is accustomed is usually characterized as a win–lose or fixed pie approach. Distributive negotiators are eager to win at the other party’s expense. Distributive bargaining involves negotiating with a focus on one’s own position rather than the underlying issues that each party values. A landlord us-ing a distributive strategy with a tenant maybe focused only on getting the highest rent possible, and may overlook other important issues (e.g., cost of finding a new tenant, benefits of a long-term tenant).
A distributive strategy is most appropriate under two con-ditions. First, the negotiator has a stronger BATNA than the other party. Second, the negotiator anticipates little or no chance of dealing with the other party in the future. That is, the negotiator has the upper hand and only needs a short-term or single transaction with the other party. When both parties have equal power and do not expect to deal with each other in the future, a distributive strategy may be acceptable though it can lead to an impasse. In such cases, an integrative strategy may be more appropriate.
Integrative Bargaining Strategy
Integrative bargaining is a win–win or expanding pie ap-proach to negotiating. Integrative negotiators focus on the underlying issues or goals that are important to both parties,
rather than on rigid positions. A landlord using an integrative strategy with a tenant may consider the search cost of finding a new tenant, the holding cost of a vacant property, and the benefits of a stable renter. The amount of rent is only one of the issues to consider. An integrative strategy is usually best if the negotiator expects to deal with the other party in the future (e.g., a strategic supplier requiring high quality and service). Alternatively, if the negotiator does not have the upper hand, an integrative strategy can be considered.
CONDUCTING THE EXERCISE
Purpose and Audience for the Exercise
This exercise engages students in a simulated negotiation between a buyer and seller of a used car with the follow-ing learnfollow-ing goals: (a) experience how a BATNA can affect a negotiation, (b) appreciate differences between distribu-tive and integradistribu-tive bargaining strategies, and (c) develop a vocabulary to help them discuss key concepts in negoti-ation The exercise can be used in undergraduate or grad-uate organizational behavior or negotiation courses, or for training–consulting, professional development, or executive education.
Preparation and Facilitation Instructions
Instructors can start with a brief lecture to introduce the con-cepts of BATNA, and distributive and integrative bargaining. Alternatively, the exercise can be run first with the concepts introduced after students reflect on their experiences. Stu-dents will be assigned to dyads as a buyer and seller of a used car using configurations noted below as selected by the instructor. For an odd number of students, one student can be paired with the instructor or assigned as an observer–data col-lection assistant. Schedule the exercise before a brief break or at the end of a class, with discussion after the break or at the start of the next class. The exercise works best if stu-dents can negotiate without others interfering. The instructor should observe dyads to ensure they understand their roles. Plan 30–40 min to run and process the exercise.
There are two versions for each of the buyer and seller roles—a weak BATNA (buyer needs a car now, and seller needs to sell the car now), and a strong BATNA (buyer has other alternatives, and seller is considering keeping the car; see Appendix). The roles should be supplemented with a sim-ulated Blue Book pricing chart (for an example, see Table 1). These can be configured in various ways. For the core con-figuration, assign half the dyads to strong buyer/weak seller BATNAs, and half to weak buyer–strong seller BATNAs. The asymmetric power distribution in this configuration en-courages the stronger BATNA negotiator to use a distributive strategy. The average selling price is more likely to be higher (lower) when the seller (buyer) has a stronger BATNA. To in-crease the chances for impasse, assign dyads to strong buyer
TABLE 1
Negotiation Exercise: Blue Book Pricing Provided to Buyer and Seller Roles
Estimated market value for 2006
Toyota Prius Trade-in Private party Dealer retail
National base price $7,737 $9,207 $10,410
and seller BATNAs. Adding this to the core configuration should provide an engaging experience. To increase coop-eration and reduce contentious negotiating dynamics, assign dyads to a weak BATNA role. Another way to facilitate an in-tegrative strategy is to modify the roles so negotiators expect future dealings (e.g., buyer and seller are friends).
As buyer and seller roles are given to each student dyad, the following guidelines should be presented: (a) do not share your role description with your negotiation partner, though you may share information as you see fit; (b) read your role carefully and thoroughly and think of yourself as someone who is really buying or selling your car; (c) find a quiet place to negotiate; (d) do not use coercion, lie, or misrepresent any facts presented to you in order to accomplish your goals in the negotiation; (e) try to consider issues that are important to you in this negotiation, beyond price; (f) take 10–15 min to plan and execute your negotiation. If you agree on a price and other terms, record the information on a bill of sale and return it to the instructor. If you do not reach a settlement, note this on the bill of sale.
Processing Instructions
After doing the exercise, the instructor can display pricing results in a template available from Gerard Beenen. This is useful to demonstrate some of the concepts the exercise con-veys. For example, if some are assigned to strong buyer/weak seller BATNAs, and others to weak buyer–strong seller BAT-NAs, the average selling price should be lower for the former and higher for the latter. Sample discussion questions include the following: Did any of you fail to reach a final settle-ment? Why did this happen? What issues were important to you during the negotiation? What challenges, frustrations or roadblocks did you encounter while negotiating? What was your BATNA as a buyer or seller? How did it impact how you approached the negotiation? If you reached a settlement,
what was the final price? Why were there so many different settlements?
The instructor can weave the concepts of BATNA, in-tegrative and distributive strategies into the discussion and debrief. For instance, when students learn some had more or less advantageous positions (i.e., BATNAs), the instruc-tor can guide the discussion into how these differences im-pacted both the dynamics and outcome for specific negotia-tion dyads. Students may wonder why not all negotiators with better BATNAs received better outcomes. The instructor can ask how much information sharing occurred between parties. Negotiators who revealed their stronger (or weaker) power position by signaling their BATNAs to the other party could have been in a better (or worse) position than those who did not. The instructor also may introduce concepts of subjective value, emotion and personality, gender, and culture.
Subjective value suggests individuals have different util-ities for different issues that affect negotiated settlements (Curhan, Elfenbein, & Xu, 2006). Some may value a car’s appearance, while others value reliability. These may affect the price they pay or other final conditions (e.g., detailing the car before delivery, mechanical inspection). Subjective value creates opportunity for integrative agreements if parties can identify and agree on issues that each party values more than the other.
Regarding emotion, angry negotiators may be more able to get what they want, while happy negotiators may be more willing to give in. Anger in negotiation, however, has sig-nificant downsides including less willingness to deal with the angry party in the future, greater conflict between what negotiators want to do and think they should do, lower ac-curacy in judging others’ interests, and a lower likelihood of achieving joint gains (Bazerman, Curhan, Moore, & Valley, 2000). Personality traits such as assertiveness or need for power might have impacts on negotiated settlements, though research has shown individual differences generally are not effective predictors of negotiation outcomes (see Bazerman et al., 2000).
In terms of gender differences, women obtain better out-comes than men when negotiating on behalf of others, while men obtain better outcomes than women when negotiating for themselves (Bowles, Babcock, & McGinn, 2005). Modi-fications can be made to buyer or seller roles in this exercise (e.g., buying or selling the car on behalf of a close friend) to see if results corroborate with these research findings. Alter-natively, outcomes can be simply compared for this exercise by gender.
Finally, relevant cultural differences can impact negotia-tion dynamics including collectivism-individualism, power distance, communication context, and perceptions of time (see Bazerman et al., 2000). Collectivistic cultures (e.g., Tai-wan) may focus on protecting relationships while individu-alistic cultures (e.g., United States) may focus on protecting individual rights. High power distance cultures that value so-cietal hierarchies may rely more on authority figures to inter-vene in negotiations. High communication context cultures
152 G. BEENEN AND J. E. BARBUTO, JR.
(e.g., Japan) may be more attuned to non-verbal cues than low context cultures (e.g., Germany). Finally, polychronic cul-tures (e.g., Asia, Middle East) process issues simultaneously while monochromic cultures (e.g., North America, West-ern Europe) process sequentially. Consequently, polychronic cultures may be more apt to tolerate interruptions and to ig-nore turn taking in conversation than monochromic cultures. Students from different cultural backgrounds may be able to illuminate some of these differences in the debrief discussion.
ASSESSING THE EFFECTIVENESS OF THE EXERCISE
Sample, Procedures, and Measures
To assess the exercise’s effectiveness, a four question pre- and posttest quiz (see Appendix) was given to 22 MBA students in an organizational behavior seminar, and 42 undergraduate students in an introductory organizational behavior course in a university in the western United States. The pretest was done at the start of class, and posttest with the same questions after the exercise and debrief were done. The undergraduate sample was 56% male, 26% Asian, 4% African American, 44% Caucasian, 14% Hispanic, and 12% Middle Eastern, and worked about 20 hr/week with a mean age of 24 years (SD =5.5). The MBA sample included full-time students who were 48% male, 44% Asian, 16% Hispanic, 28% Cau-casian, and 12% Middle Eastern, with three years of full-time work experience with a mean age of 25 years (SD=2.7).
ANALYSIS AND RESULTS
A paired samplesttest compared the number of correct an-swers for the pre- and posttests for each sample as displayed in Table 2. The MBA sample had significantly higher posttest versus pretest scores (M=3.64 vs.M=1.73),t(21)=–5.93,
p <.001. The same was true for the undergraduate sample
posttest versus pretest scores (M =3.43 vs. M = 2.26±
1.33) t(41)=–5.17, p < .001. This suggests the exercise
and debrief conveyed the meaning of key concepts including BATNA, and distributive and integrative bargaining for both
TABLE 2
Negotiation Exercise Pre- and Posttest Scores for MBA and Undergraduate Student Samples
Pretest score
Note:n=21 for MBA sample,n=42 for undergraduate sample. Quiz contained four questions.
TABLE 3
Negotiation Exercise Final Sales Price for MBA and Undergraduate Student Samples
Note:n=12 for strong seller BATNA,n=7 for strong buyer BATNA. One negotiating pair ended in impasse for undergraduate sample, two nego-tiating pairs ended in impasse for MBA sample,n=42 for undergraduate sample.
student samples. The slightly higher undergraduate versus MBA pretest score likely was due to the fact that the under-graduate students had prior assigned reading on negotiations and conflict management.
Table 1 displays hypothetical Blue Book pricing. The same pricing chart was provided to both buyer and sellers roles. Table 3 displays the actual selling prices for both sam-ples, which were not significantly different for the MBA (M
=$8,627;SD=$468) and undergraduate (M=$8,796;SD=
$535) samples. Two MBA dyads and one undergraduate dyad ended in impasse. Some undergraduate dyads were assigned to a strong seller–weak buyer BATNA condition, while oth-ers were assigned to a weak seller–strong buyer BATNA condition. As expected, the average selling price was higher when the seller had a stronger BATNA (M =$8,940;SD=
$322) and lower when the buyer had a stronger BATNA (M
=$8550; SD =$718). Given the small number of dyads,
however, the difference was not statistically significant.
CONCLUSIONS
We have presented the rationale, content, and procedure for a classroom exercise intended to help students experience the concepts of BATNA, integrative and distributive bargaining. These are core concepts in negotiation that are critical to include in both undergraduate and graduate courses. A sim-ple pre- and posttest with MBA student and undergraduate samples indicated the exercise was effective at conveying a rudimentary understanding of these concepts. We encour-age educators to consider using this activity with their un-dergraduate and graduate students to introduce the topic of negotiation in their planned curriculum.
REFERENCES
Ball, S. B. (1999). A classroom exercise for achieving active learning. Jour-nal of Education for Business,74, 341–346.
Bazerman, M. H., Curhan, J. R., Moore, D. A., & Valley, K. L. (2000). Negotiation.Annual Review of Psychology,51, 279–314.
Bazerman, M. H., & Neale, M. A. (1992).Negotiating rationally. New York, NY: Free Press.
Bowles, H. R., Babcock, L., & McGinn, K. L. (2005). Constraints and triggers: Situational mechanics of gender in negotiation.Journal of Per-sonality and Social Psychology,89, 951–965.
Branagan, A. (2009).Making sense of business: A no-nonsense guide to business skills. London, UK: Kogan Page.
Buzzanell, P., & Meina, L. (2007). It’s ‘give and take’: Maternity leave as a conflict management process.Human Relations,60, 463–495. Curhan, J. R., Elfenbein, H. A., & Xu, H. (2006). What do people value when
they negotiate? Mapping the domain of subjective value in negotiation. Journal of Personality and Social Psychology,9, 493–512.
Davey, K. M., & Arnold, J. (2000). A multi-method study of accounts of personal change by graduates starting work: Self-ratings, categories and women’s discourses.Journal of Occupational and Organizational Psychology,73, 461–486.
Fiona, G. (2008). Propensity to negotiate and career advancement: Evidence from an investment bank that women are on a “slow elevator.”Negotiation Journal,24, 495–508.
Lax, D. A., & Sebenius, J. K. (1986).The manager as negotiator: Bargaining for cooperation and competitive gain. New York, NY: Free Press. Lewicki, R. J. (1997). Teaching negotiation in colleges of business: The
state of the practice.Negotiation Journal,13, 253–269.
McShane, S., & Von Glinow, M. (2009).Organizational behavior. New York, NY: McGraw Hill/Irwin.
Melamed, T. (1996). Validation of a stage model of career success.Applied Psychology: An International Review,45, 35–65.
Movius, H. (2008). The effectiveness of negotiation training.Negotiation Journal,24, 509–531.
Munduate, L., Ganaza, J., Peiro, J. M., & Euwema, M. (1999). Patterns of styles in conflict management and effectiveness.International Journal of Conflict Management,10, 5–24.
Navarro, P. (2007). The MBA core curricula of top-ranked U.S. business schools: A study in failure?Academy of Management Learning & Edu-cation,7, 108–123.
Page, D., & Mukherjee, A. (2007). Promoting critical-thinking skills by us-ing negotiation exercises.Journal of Education for Business,82, 251–257. Robbins, S. P., & Judge, T. J. (2010).Organizational behavior(14th ed.).
Boston, MA: Prentice Hall.
Rubin, R. S., & Dierdorff, E. C. (2009). How relevant is the MBA? Assessing the alignment of required curricula and required managerial competen-cies.Academy of Management Learning & Education,8, 208–224. Taylor, K. A., Mesmer-Magnus, J., & Burns, T. M. (2008). Teaching the art of
negotiation: Improving students’ negotiating confidence and perceptions of effectiveness.Journal of Education for Business,83, 135–140. Volkema, R., & Rivers, C. (2008). Negotiating on the Internet: Insights from
a cross-cultural exercise.Journal of Education for Business,83, 165–172. Whetten, D., & Cameron, K. (2011).Developing management skills(8th
ed.). Boston, MA: Prentice Hall.
APPENDIX
Buyer Roles: Weak and Strong BATNAs
1. Buyer Role (Weak BATNA)
Your old car just died, so you need to buy a car. You’re focused on finding a used Toyota Prius. After scouring Craig’s List and AutoTrader.com, you found two “Prii” (yes, that’s the new plural for “Prius”) that seem promising. Both are 2006 base models with standard features (air conditioning, power steering, AM/FM stereo with CD player, air bags, and 4-wheel ABS braking system). That’s really all you want. The first Prius you saw was in good condition with 89,000 miles
and doesn’t need any maintenance work. You negotiated the sellers down to a price of$10,000 but they refused to lower the price any more. You told them you’d keep looking, and they told you that if you changed your mind and were ready to pay $10,000, you should come back. The second Prius
was advertised for $10,000 but you think you can get it
for less. During a test-drive you took it to an honest and trusted mechanic. Your mechanic said the car is generally well maintained and in good shape. There are some small dings and scrapes on the paint, and marks on the seats, but that’s to be expected in a 6 year old car with 95,000 miles. The Blue Book (see chart) suggests the car may sell for between
$8,000 and$9,000 for a private party. But you know this is only an estimate. Similar cars may sell for more or less than that.
You’re returning from your test drive and preparing to meet the seller of this second Prius. You’ve already secured financing. You need a car because taking the bus is inconve-nient and time consuming, and you live too far from school and work to ride a bike. You’ve been taking a cab to save time, but that is getting very expensive. You’re eager to close the deal with the seller. You don’t think the Kelley Blue Book Value accurately reflects the recent trend towards rising gas prices. You expect the continued rise in gas prices will make this a good purchase and make a Prius an even more desirable car.
2. Buyer Role (Strong BATNA)
Yourold car just died, so you need to buy a car. You’re focused on finding a used Toyota Prius. After scouring Craig’s List and AutoTrader.com, you found two “Prii” (yes, that’s the new plural for “Prius”) that seem promising. Both are 2006 base models with standard features (air conditioning, power steering, AM/FM stereo with CD player, air bags, and 4-wheel ABS braking system). That’s really all you want. The first Prius you saw was in good condition with 89,000 miles and doesn’t need any maintenance work. You negotiated the sellers down to a price of$10,000 but they refused to lower
the price any more. You told them you’d keep looking, and they told you that if you changed your mind and were ready to pay $10,000, you should come back. The second Prius was advertised for $10,000 but you think you can get it for less. During a test-drive you took it to an honest and trusted mechanic. Your mechanic said the car is generally well maintained and in good shape. There are some small dings and scrapes on the paint, and marks on the seats, but that’s to be expected in a 6 year old car with 95,000 miles. The Blue Book (see chart) suggests the car may sell for between
$8,000 and$9,000 for a private party. But you know this is
only an estimate. Similar cars may sell for more or less than that.
You’re returning from your test drive and preparing to meet the seller of this second Prius. You’ve already secured financing. You need a car because taking the bus is inconve-nient and time consuming, and you live too far from school and work to ride a bike. At the same time, you’re evaluating
154 G. BEENEN AND J. E. BARBUTO, JR.
if it makes sense to move closer to work and school so that you don’t depend on owning a car. In fact, an opportunity has just come up for you to move to a new place that’s close enough to bike to work and school, without raising your rent. This new place also is closer to more convenient bus routes that would allow you to use the bus for work, school and shopping when the weather is bad. PlusZIPCarR, the new car sharing service, recently added vehicles near campus that you can use for day trips when you want a car, for less than the cost of owning.
On the one hand, you like the freedom that goes with owning your own car. So you’re still willing to buy the Prius if you can get a really good deal. On the other hand, rising gas prices, the opportunity to move to a more convenient place, and the potential forZIPCarR as a lower cost option, cause
you to question if you really need to buy this Prius.
Seller Roles: Weak and Strong BATNAs
1. Seller Role (Weak BATNA)
It’s time for you to sell your 2006 Toyota Prius. You bought it new 7 years ago, and it has 95,000 miles on it. You’ve generally done a good job maintaining it. It’s been a good car, but since you just bought a new SUV, you don’t really need it any more. It has the standard features: air conditioning, power steering, AM/FM stereo with CD player, air bags, and 4-wheel ABS braking system. After consulting the Blue Book (see chart below), which said your car was worth between
$8,000 and$9,000, you listed the car a few days ago with an
asking price of$10,000 on Craig’s List. A number of people
have emailed and texted you about the car. However, so far only two potential buyers have come to see it.
The first potential buyer offered you$7,000, but refused to pay any more. You weren’t ready to sell at that price. After all, that’s why you decided to sell the car on your own rather than trading it in at the dealer. You have their number and can call them if you change your mind.
You’re now dealing with the second potential buyer. This person took the car out on a test drive, and had it inspected by a mechanic. You know your car is in good condition. The second potential buyer is coming back from the test drive to negotiate with you.
You’re eager to sell your car and close the deal with this buyer. After all, the reason you’re selling the car to begin with is you just bought a new SUV. And you really need the cash from selling your Prius to help pay for gas since your new SUV isn’t as fuel efficient as a Prius. Plus, you don’t want to pay insurance on two cars, so you’re pretty eager to sell the Prius.
2. Seller Role (Strong BATNA)
It’s time for you to sell your 2006 Toyota Prius. You bought it new 7 years ago, and it has 95,000 miles on it. You’ve generally done a good job maintaining it. It’s been a good car, but since you just bought a new SUV, you don’t really
need it any more. It has the standard features: air condi-tioning, power steering, AM/FM stereo with CD player, air bags, and 4-wheel ABS braking system. After consulting the Blue Book (see chart below), which said your car was worth between$8,000 and$9,000, you listed the car a few
days ago with an asking price of$10,000 on Craig’s List. A
number of people have emailed and texted you about the car. However, so far only two potential buyers have come to see it.
The first potential buyer offered you$7,000, but refused to pay any more. You weren’t ready to sell at that price. After all, that’s why you decided to sell the car on your own rather than trading it in at the dealer. You have their number and can call them if you change your mind.
You’re now dealing with the second potential buyer. This person took the car out on a test drive, and had it inspected by a mechanic. You know your car is in good condition. The second potential buyer is coming back from the test drive to negotiate with you.
During the second potential buyer’s brief test drive, you received 2–3 calls for the car (versus 2–3 calls over the pre-vious few days)! You now think the Blue Book value may be understated because it’s not accounting for the trend to-wards higher gas prices. Given this trend, you’re wondering if it makes sense to keep your Prius as a second car. After all, your new SUV isn’t as fuel efficient as the Prius, and keeping insurance on it shouldn’t cost much, and could more than offset the fuel you’d save by driving the Prius on short trips.
On the one hand, you’d like the cash if you can sell your Prius at the right price, especially with the apparent increase in demand (and potentially price) for Prii given the expected increase in fuel costs. On the other hand, rising fuel costs and the opportunity to keep the Prius as an economical second car cause you to question if you really need to sell it. You may be able to save more money on gas by just keeping the Prius.
Pre- and Posttest Questions for Concepts Conveyed by the Exercise
1. A BATNA stands for a. I’m not sure
b. Best alternative to a negotiated agreement
c. Buyer’s alteration of a negotiated agreement d. Buyer’s adjustment to a negotiated agreement e. Buyer’s advancement to a negotiated agreement
2. A BATNA gives a. I’m not sure
b. Power to the negotiating parties
c. Clarity to the negotiating parties
d. The selling party a sense that the buyer is decisive e. The selling party a sense that the buyer is
indeci-sive
3. bargaining describes a strategy where negotiators focus on maximizing their own gains in the negotiation. a. I’m not sure
b. Two-sided c. Integrative d. Distributive
e. Contentious
4. bargaining describes a strategy where negotiators focus on creating mutual gains in the negotiation. a. I’m not sure
b. Two-sided c. Integrative
d. Distributive e. Contentious
