bargaining, what do we see? In

distributive bargaining, we see that you

have, basically, like a scale here. (Let me

show you here. Nope, not there. Here

may be, about here. Here we go. Let me go on

my monitor here. That's nice. Oops, turned off

my screen. okay there we go.) All right, so we

have a scale. So on this scale, I put a

little picture of a pizza. Now, why pizza?

Because remember Fred and Jane were

arguing about the pizza, right? Now why is

pizza good example of this? Well, on the

scale, you see, if one side goes up the

other side goes down. If one side goes

down, the other side goes up. That's

distributive bargaining. Anytime, this

side goes up, the other side goes down.

What one side wins, the other side loses.

What one side loses, the other side wins.

So you win, I lose. I win, you lose. So

that's what distributive bargaining is.

Both sides are in direct conflict, and

there's really not a lot you can do to

change that. The resources are fixed. What

does it mean to be fixed? Just like in

this picture, here. It's a pizza. It's a

round pizza. There's no more pizza. That's

it. We cannot go buy more. There's no more.

We gotta split up this pizza. If you get

one piece, I get one piece less. If I get

one piece, you get one piece less. So in

the case of Jane and Fred, that was

extreme. They had only one little tiny piece,

but same thing. If I cut it in half, one

person gets half, the other person gets

half. Would that be okay? Well, no.

Because Fred and Jane want to be full. They

want to eat enough, so that they are not

hungry.

And half is not enough, so they both want

to eat the whole piece. In any case, Fred

wants more, and Jane once more. They both

want more, so someone is going to have to

win, and somebody's going to have to lose.

And you say, "Well, Professor Warden, what

if they just cut the pizza in half and

their both are a little bit happy, isn't

that good? I mean, yeah, they still might

be hungry but at least Fred gets a

little bit, and Jane gets a little bit."

And the answer to that is, in that case,

yes, you're right. Fred will get a little

bit, and Jane will get a little bit, and

Fred will be a little bit less hungry,

and Jane will be a little bit less

hungry. But in this way, they're both

still hungry, so they both lose. So

thinking win-win, it's not so easy. Just

cutting something in half does not mean

win-win. That just means I get half

of what I want, which is the same as

losing, right? It's the same as losing, and

in distributive bargaining both sides do

not want to lose. And later, when we study

win-win, both sides don't want to lose

either. It's not just cutting something

in half. That is not the way it works. So

in this case, I use the scale to show one

side goes up, one side goes down. There's

just no way to stop it. Or the pizza, if

you get something, I get something less,

and in Fred an Jane's case, a very small

amount. So they're both going to end

up being hungry no matter what we do.

Okay. So I think I kind of made the point

there clear. For the buyer, a distributive

negotiation begins with what the best

deal is-- the target point. Now, let's begin

looking at this very, very carefully, step

by step, because I want you to remember

this, because it's a really key idea, right?

very, very important. So if you're the

buyer, a distributive negotiation begins

with the best deal, which means getting

the lowest price, right? I want to buy at

the lowest price. OK. So I want to buy

this cup,

and I want to get the lowest price. This

cup costs one hundred dollars, and I

would like to get less than 100, and

lower is better, right? if I am the buyer.

So the target point is the best deal, and

the worst deal is still acceptable.

That's called the resistance point. So

let's say this cup here, this cup, maybe

the retail price, the sticker price is

100, okay, whatever. It doesn't really

matter to me. I have my price. So for me,

what is my target price? Well, if i could

pay 50, that is what i would like to pay.

Of course, I'd like to pay zero, right? but

remember what we talked about in the

previous units? that i need to have what

is my target. So in this case, let's say

my target is 50. OK. Now, then I'm the

buyer, so I would like to go lower, so 50

is my target price. That's my target

point. Now, how much does the price go up

and I'm not going to buy? 50 is what I

what I'm targeting, target point. Ofcourse,

if it's lower than 50, I'm

happy. That's fine, right? But 50 is my

target. Now, how much higher does the

price go and I'm just not going to buy

it if it goes higher? In that case, let's

say that my upper price, my resistance

point, I will not go past the

resistance point. Let's say that my

resistance point is... let's say 80, OK.

The sticker price maybe 100. We

don't care. That sticker price is

not important, the retail price is not

important to us. If that retail price is

100, that is over my resistance point of

80. So if somebody tells me you must pay

the price that's on there, the sticker

price, the retail price, the list price

I'm going to say no. I don't want to

spend that because that is over my

resistance. So we have two things here:

target and resistance. I want you to

remember.

So the resistance point for the buyer is

the highest price i will pay. Higher than

that, I will not buy, right? Higher than

that, i will not buy. The target point is

the desired price for me, 50. Anything

beyond the resistance point cannot be

accepted. 80, if it's 81 dollars, I will

not accept. If it's 82 dollars, I will not

accept it. If it's ninety dollars, no. If 143 00:07:07,860 --> 00:07:15,569 it's one hundred dollars, no. If it's

$79, then yes. I can accept that. That

doesn't mean I will accept it, but I can

accept that. If it's eighty dollars, can I

accept that? Yes, that's my, that is my

actual resistance point, right? but 81?

no. Both the target point and the

resistance point are secret information

that you should not tell the seller. Now,

here, we get into the next important

point in negotiation. And that is this

idea of secret information. So this is

the cup Ii want to buy. This cup I want to

buy it for 50. That's my target, my target

point, the most i will pay is 80. So 50 to

80 in here, right? If you are going to

sell to me, and I told you, "Sir I would

like to buy that cup, and I would like to

buy that cup somewhere from 50 to 80.." And

what would you say to me? You would say,

"Oh, no problem, 80." And then what would I

say? "Well, 80 OK." 80 because 80 is still

within my resistance, right? Resistance

point, target point, resistance, it's

inside. Now, that was pretty stupid of me

to tell you that, right? I should just

tell you that 100 is way too much. I'm

not going to

spend that much, and then you say well

how much do you want? and then maybe I

begin by saying how much do I want. Maybe

I begin by saying 40, and then we can

work up like that, right? So we begin with

two ideas here, both of them are secret.

Resistance point and target point-- please

remember those. Those are so awesomely up

here, right? Resistance point and target

point. Okay. Secret information-- you never

want to tell the other side, in this case,

the seller. You never want to tell the

seller. Okay, now then let's change

perspective a little bit. Now the seller

is a little bit different, right? If the

seller is selling this cup, then the

seller must begin with a price, right?

Because he's selling it, I mean you

cannot go and ask, "I would like to buy

that cup. How much is it?" and the seller

says, "Hmm. I don't know. How much money do

you have?" Right? That doesn't work,

right? No, I don't think that works,

although there are some companies that

do that kind of thing. So if you come to

me you say, "Mr. warden, I'd like to buy

that cup." And I say, "Hmm.. the price of this

cup, let me tell you.. How much money is in

your pocket right now?" I don't think that

would be a good way to begin. What do we

normally begin with? Normally, you go to

the seller, and there's a price there, a

sticker price or a list price or retail

price, and that price is listed there. Or

you can ask me and I tell you 100. This

cup is 100. So the seller must always

begin. The seller must always begin with

some public information, and that public

information is going to be the price.

So we call this the seller's asking price,

the sellers asking price. OK. Now, after

the seller is asking price what comes

next? Let's take a look. "At the start of

the negotiation, one value is public

everyone can see it. While two values are

secret." So the asking price, the selling

price, the retail price, the list price

this in fact is public. Two other values

or secret, but we'll talk about that in a

second. So the first step is for the

buyer to decide how much to offer or the

initial starting offer, right? So if i go

to buy the cup, and the list price is 100,

I must decide what do I say to begin

with. Do I say 0? "You should give me that

cup for free, please." Well, I can't start

with zero. I guess I could start with 0, but no

one's going to take me serious, right? So

what do I begin with? That's going to be

the opening or first offer. The first

offer needs to be lower than the target.

Remember my target, right? Remember my

target? My target was 50. Since the seller

will try to raise the price, the seller

will always try to make the price go up.

So the buyer should begin under the

target. If my target is 50, I would like

to get 50. How do I get 50? I must begin

below 50. I say i'll give you 40. So here

we have this little chart. I like this a

lot. We can see, on this graph here, on

this line, we have three things so far. On

the right side, we have the buyers

resistance point, that is I will not

spend more than this. In my case, the

example was 80. I will not spend

more than 80. Then you have the buyer's

target point. In my case was 50 for the

cup, so I will spend more. I will

definitely spend less than this. I'm