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SCENARIO:
The Parkers and the Gibsons own homes on adjacent plots of land. The homes are separated by a 1/2 lot the Parkers purchased years ago in hopes of building a tennis court, which they never got around to. The Parkers are now moving out of state and are interested in selling the half lot, as the buyer of their home is not interested in it. The Parkers have approached the Gibsons (who have interest in the lot for home improvements they have planned) about purchasing the lot. Neither party knows much about the other’s interests. The Parkers and Gibsons are meeting to explore whether a mutually beneficial transaction is possible.
NOTE: This exercise is a modified and improved version of a former exercise entitled Appleton v. Baker (Appleton v. Baker is still available, upon request). This exercise is also analytically similar to the exercises The Book Contract (with a different setting) and Bradford Development (without the linkage payment).
MECHANICS:
The exercise is best run as a one-on-one exercise. Preparation should require 5-10 minutes. Negotiations can take from 10-30 minutes, and review from 30 minutes to 1 1/4 hours.
TEACHING MATERIALS:
- Role specific:
Confidential Instructions for:- Parker
- Gibson
- Teacher’s package:
- All of the above
- Teaching Note (English version only)
PROCESS THEMES:
Anchoring; BATNA; Fairness; Information exchange; Interests, dovetailing; Joint gains; Objective criteria; Offers, first; Pareto optimization; Quantitative analysis; Risk aversion; Trust
MAJOR LESSONS:
When several pairs negotiate this game at the same time, the resulting sale prices vary dramatically. Participants can then discuss how and why different negotiation strategies led to different outcomes.
Concepts of “fair prices” often surface in post-negotiation discussions. If participants do not take a “principled” approach to the negotiation, one side or the other often feels “taken,” especially when other players with the same role appear to do better.
The advantages and disadvantages of making the first offer can be explored, as well as techniques for doing so.
The advantages and disadvantages of truthfully revealing your BATNA can also be illustrated, especially when several pairs negotiate the exercise.