Subtitles section Play video Print subtitles Now, when we look at distributive 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.