Lecture 4Negotiating Strategy

1. Sally Swansong

2. Axiomatic (Nash) Bargaining

Sally Swansong

• Quick Exercise: After interacting, think about BATNAs.

– Sally’s Agent: Write down what you think the most the Lyric would have paid?

– Lyric: Write down what you think the least Sally would have accepted?

• Do you think your BATNA was stronger or weaker than the other side?

Sally Swansong

• The Obvious:

– Your goal is not to reach an agreement,

– Goal is to create value and do well for yourself.

• Involves?

– Improving your BATNA

– Not doing deals that don’t make sense

– Trying to find ways of creating joint (or solo) value.

Sally Swansong

• What is the ZOPA?

– Zone of possible agreement: $0--$45k

• Interests versus positions

• Ego versus allocentric

• Issue of preparation

Interests?Sally:

• Making a comeback

• Proving she still has it

• Reputation

• Performing star role (and being treated as such)

• Salary precedent

• Firm contract

Opera:

• Successful Norma

• Not creating salary precedent

• Finding best talent

• Not losing money

• Publicity

Nash Solution

• Axioms (Assumptions that we’ll use to solve a bargaining problem.)

– Respects affine transformations

– IIA (Independence of Irrelevant Alternatives)

– Pareto Efficiency

– Symmetry

Next Time

• Readings for Next Time:

– Raiffa, pages 251-274 & 288-299

– Bazerman, pages 127-139

– Nash: The Bargaining Problem

• Optional:

– Osbourne & Rubinstein, Chapter 13. An Introduction to Coalitional Bargaining