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• 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.