Negotiation always happens in our day to day life. Indeed, the more complicated the problem, the more important to have a principle. This negotiation course has introduced servaral principles and key to the negotiation is to find out:

What is the pie? Pie is the savings the two parties can create by working together compared to what they can get on their own.

The fundamental point that underlies all negotiation is to get there, all joint parties have to agrree on how to divide the pie.

Proportional Division

Proportional division doesn’t look at the pie. The pie is divided up proportional to counterparties requests.

The principle of the Divided Cloth

A historical context for how to divide the pie. We expect each party will try and make the largest claim he or she can justify.

Example:

• Person A has claimed the whole pie
• Person B has claimed half

If we look at both claims together, the dispute is really only over half the pie. Person B is only looking for half pie so the other half pie is not dispute and Person A should take it. Then A and B should divide the dispute portion, half pie. Therefore, Person A will gets 75% while Person B gets 25%.

Two stages:

1. Making claims
2. Dividing things up

*Note: In some negotiations, the claims are really not negotiable.

Shapley Value

Make things fair by averaging across all possible orders.

Remarkable features (the only solution that obeys the following four properties):

1. There’s no money left on the table.
2. Who gets what does not depend on people’s names. All that matters is the pie one creates.
3. If someone can never save anybody else money, then that player doesn’t get to share in any of the savings.
4. If there are two cost-sharing problems and we combine them, the solution to the combined problem is equal to the sum of the solutions to the separate problems.

BATNA: best alternative to a negotiated agreement

Economists call this your reservation value. The most important starting point for any negotiation is to know your walkaway price.

Ultimatum Game

One way to get power in negotiation is to put yourself in the position where you can make ultimatums.