1. Module 2 Distributive Bargaining
 When we start negotiations even on easy cases (i.e. selling our car) we
always have in mind our objective, either this is a price or a benefit. In the
case of a price and if we are the sellers, we look for a minimum like (low
price) and our maximum objective (higher price).
 The situation is exactly the same for the potential buyer. He also has in
mind an entry price that he could accept and an exit price that is his sealing.
 The distance between those two prices of both negotiators is the total
negotiating range
Buyer’s entry price Seller’s entry price
The total negotiating range

2. Module 2 distributive Bargaining
 Do we reach an agreement if the entry prices of the interested parties are
separated by a negotiating range?
 This negotiating range means that there is a “distance” between the parties
and there is a need of movement!
 Total negotiating range
100 115 Gap 120 130
Buyer’s negotiating Seller’s negotiating
range range
 The essential condition for a negotiation to be successful (when our focus is
on one issue) is when the exit prices of each negotiator meet. (case 1)
Buyer 100 120 130 Seller

3.  But what happens when the exit prices of each negotiator overlap? (case 2)
 Buyer’s negotiating range
 100 settlement range 120
115 Seller’s negotiating range 130
 A settlement range is created and the negotiation will take place & close
somewhere within this range.
 The way the negotiation will close depends on the time , the willingness
and the intentions of both parties which are unknown .

4.  But what happens when the entry prices of each negotiator overlap ?
(case3)
 Buyer’s negotiating range
120 ?Exit
100 115
Seller’s negotiating range Seller’s revised negotiating range
 The seller is ready to sell at 115€ when the first offer starts at 120€.
 The seller’s best response is to reconsider his initial range and revise
accordingly .(try to get a price higher than 120€)

5. The negotiator’s surplus (case 4)
seller Buyer
115 120
settlement range
• The seller is ready to accept a price as low as 115, while the buyer is ready to
pay a price as high as 120. any price between this range is called settlement
price.
• In case the buyer buys at a price of 115 he will have a surplus of 120-115=5 from
the price he was keen to pay. (Buyer’s surplus)
• But in case the seller sells at a price of 120, then he will have a surplus of 120-
115=5 from the price that he was ready to sell. (seller’s surplus)
• Any surplus resulting from a negotiation is called Negotiator’s surplus

6. Behavior in Negotiations
 Remember –It’s all a game.
 You never know what the other side has in hand .
 BUT you can work on assumptions.
 Never take for granted that the first price is the final offer- Ask” is this the
best you can offer to me?”