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.