# Negociation: Negotiation and Reservation Price

1923 Words Sep 11th, 2014 8 Pages
Anna Hardy - Lucie Lambert - Manon Lauzet - Thomas Jouvel - Chloé Gilles

EXERCICE IN NEGOCIATION ANALYSIS

EXERCISE ON BATNAS, RESERVATION PRICES, AND ZOPAS

A PRIMER ON BATNAS, RESERVATION PRICES, AND ZOPAS

This introduction talks about Negotiation concepts. BATNA (Best Alternative to Negotiated Agreement) is the last proposal that a person can do before exiting the negotiation. You have to prepare your BATNA before the negotiation to keep in mind what is your alternative solution if the agreement cannot be reach.

Then, RESERVATION PRICES is the point beyond which a negotiator is ready to walk away from a negotiated agreement. In a negotiation you are indifferent between settling at your reservation prices or BATNA. The reservation
MOREOVER, HE OR SHE WOULD PREFER \$100 P FOR SURE TO A P CHANCE AT \$100 AND A 1 PCHANCE AT \$0. NOW SUPPOSE THAT CONDOR IS RISK AVERSE. HOW WOULD CONDOR'S RESERVATION PRICE CHANGE?

If we suppose that Condor is risk averse, then it will prefer the EMV (\$18/unit) to the low possibility of selling at \$30/unit. ANYWAY, THEY WILL SELL THE CPU MORE THAN \$15/UNIT, SO CONDOR'S RESERVATION PRICE WILL BE BETWEEN \$18 AND 15\$.

Exercise 2 :

_Mary wants to sell her house for \$215.000; she didn't have any proposition until this young couple's offer (\$170.000). Mary told to her agent that this price is out of the ZOPA, but she is ready to negotiation._

Mary should decrease her reservation price for the house because there is only one proposition; on the other hand, this couple seems to be very interested by her house. However, the reservation price cannot decrease until \$170.000, but it cannot reach the \$215.000 as well.

Here is our proposition of reservation price, to meet the interest of the both parts.

\$180.000 \$205.000

ZOPA \$25.000

EXERCISES ON PARETO EFFICIENCY

A PRIMER ON PARETO EFFICIENCY

During a negotiation, one first negotiator Alice may simply find an agreement "A" better than an agreement "Y" because it is better for her, even if this is the worst case for the other part. But we can say that an agreement "X" would be better than agreements "Y" and "A" because it Is better for both parts. If there is also an