Description
Simulation #3: Board of Education (BE) vs. Teachers Association (TA)
Preparation and Strategy
We began our preparation by reading the simulation material several times to extract
relevant and essential information for the negotiation, including the main priorities of the Board
as well as the goals we were trying to achieve. From the material, our group determined our
subjective utilities that included, preventing an impasse, or even worse a teachers’ strike, and
ultimately, retaining our positions on the Board. The given material also gave us a basic
understanding of the situational factors affecting this negotiation. For instance, it was evident
that the Board was under time pressure to finalize an agreement with the Teachers Association,
as we are only one week away from the beginning of the school year. If we are unsuccessful in
finalizing a contract at minimal cost or preventing the teachers from going on strike, the
community could withdraw its support of the board and ask for our resignations. Between the
Teachers Association and Board of Education, the six issues remained unsettled including:
reduction in staff, benefits, workload, salary, binding arbitration of employee grievance, and
evaluation of teachers. Taking the interest of both sides into consideration, the team planned to use
a collaborative strategy overall, since there is already an existing relationship and both parties
can benefit if a deal is made. Additionally, this negotiation deals with the Principal-Agent theory,
where the Teachers Association can be seen as the principal, as the teachers are the individuals
that will be directly affected by the decisions that are made throughout our negotiation.
Due to the significance of controlling the budget in this negotiation, our team planned to
bring a calculator to the negotiations to help calculate figures effectively, especially for the issues
of health insurance and salary. Additionally, we created a comprehensive spreadsheet prior to the
negotiation, and calculated the specific dollar amounts contributed by the Board and the teachers
towards the total annual cost of healthcare coverage. Further, we used the percentages that were
given to calculate how much more teachers were going to pay towards their health insurance, if
we increased their percentages to 15-20%. Lastly, we did research on the cost-of-living in
Ridgecrest, when compared against nearby neighborhoods and against the national average, in
order to give us some credibility when discussing potential salary increases. We found that the
cost of living in Ridgecrest was 3% lower than the national average. Therefore, we planned to use
this point to negotiate with the teacher association to control our budget.
While preparing for the negotiation, it was also critical for us to determine target points.
As mentioned earlier, this negotiation consisted of six components and the target points were
determined accordingly. First, regarding reduction in staff, the Board planned to increase the pupil
to teacher ratio from 13.5 to at least 15.5. While doing research, we also found that the average
pupil to teacher ratio in the U.S. was currently 15.8. The second issue focused on benefits,
including health insurance, bereavement leave, and sick days. At present, there was a total of 10
days of sick leave for each teacher and the board expected to reduce it to a range of 5 – 8 days.
Additionally, within health insurance benefits, the traditional insurance plan was expected to be
switched to a health maintenance organization (HMO), and we would take advantage of the
spreadsheet, which was made and calculated in advance, to help us to control the budget. Third,
the teachers’ workload was also a major negotiation point for us because the board expected to
make the workday longer for teachers. The work day of teachers at present was 7 hours and 5
minutes, including 5 hours and 25 minutes for teaching and extra assignments, another 50 minutes
for preparation, and 50 minutes for duty-free time. Target points for the issue of workdays of
teachers was a slight increase of 45 minutes, reaching the current contract workdays of 8 hours. In
order to make the negotiation of workload smoother, we have also discussed more details about
workload. On the one hand, we proposed to eliminate the preparation time of 50 minutes and
reduced the duty-free time to 25 minutes. By that means, we could have more space to accomplish
an increase of extra time because there was no preparation and duty time.
As for the other duties that needed to be finished, the Board would hire an outsider or assign
any qualified teacher to accomplish that. Fourth, in order to control the budget as much as possible,
our team’s resistance point in terms of a salary increase was $5,000. However, we also felt that it
was difficult to provide such an increase, and unless the teacher association makes a huge
concession, the possibility of failure at this point is high. However, the Board of Education would
also propose that if the cost of living in Ridgecrest increases, we would be willing to bargain or
make a concession for a salary increase. Therefore, the board would primarily take advantage of
the fact that the living standard on Ridgecrest was lower than the national average to bargain if
they required a higher salary. The fifth point concerned the binding arbitration of employee
grievances, which was not as critical as the other issues. Therefore, we would take advantage of
this in order to make concessions in exchange for the other negotiation concessions. Lastly,
concerning the evaluation of teachers, the aim of the board was to hire a consultant to evaluate the
teachers and both parties would discuss in respect of the teacher review of evaluation, evaluation
conference procedures, and timing of evaluation use. With complete preparation before the
negotiation, the chance to realize satisfactory outcomes will be higher for both parties.
Description & Analysis of the Negotiation
March 25: Initial Negotiation
On March 25th, we had our first meeting with the Teachers Association. Both teams
agreed to negotiate three out of the six general categories, and the remaining three during our
final in-class negotiation. Sofia began our negotiation with a focus on salary, stating that it was
one of their main priorities. Karnika mentioned that since teachers in the same district have
recently been getting raises, they don’t want their teachers getting the short end of the stick. Our
group quickly responded that the Board wasn’t going to be able to provide such salary increases
unless sacrifices are made elsewhere and only if there was an increase in cost of living. We
mentioned to the Association that after doing some research, we found that the cost of living in
Ridgecrest, California was 3% lower than the national average. However, after considering the
consequences of the teachers potentially declaring an impasse or even worse, going on strike, we
asked the Association if they had any number in mind. The TAs responded with a $10,000 salary
increase per teacher, per year and even offered an option that more junior teachers could take a
lower salary, whereas senior teachers could have a higher salary, if it would make it easier to
accommodate. As the association believes this is what will make the teachers happy, they also
told us that if a raise doesn’t happen, the teachers would be willing to go on strike. We realized
that their number was far beyond our resistance point, however, we told them that we would
return to the topic further in the negotiation. Our group then asked if any teachers were retiring
soon, to which they responded that no more than 20 were willing to retire. Eventually, both
teams decided to move on and negotiate on other topics first, and come back to the salary
discussion at a later time.
Next, we discussed benefits, particularly health insurance, and first asked the Association
what the teachers were looking for? They explained that since the switch from traditional
insurance to an HMO plan limits teachers’ options to doctors, they are not in favor of this switch
and want to keep the health insurance as it is. After discussing that the HMO plan would be
ultimately cheaper for teachers, the Association refused to budge. The Board eventually
proposed not switching to an HMO and sticking with the traditional system, but instead
increasing the percentage contributed to the total annual cost by the teachers to 15-20%. Before
officially agreeing, both sides said we would also come back to figuring out the specific
percentages when we discussed salary. Further, we then negotiated on bereavement leave. The
Association told us they would like six days paid leave, with two additional days for in-laws. We
first asked what the reasoning was behind the additional two days for in-laws, to which they
responded: “because it’s the right thing to do.” We offered to provide a total of two days, which
they thought was absolutely ridiculous. The Association then brought up potentially striking a
compromise, maybe if they reduced it down to three days, they could get a salary increase in
exchange. However, for everyday they gave up, they were asking for an additional $1,000 in
salary. Essentially, less days for a higher salary. Both teams also agreed to table this for now, and
come back to figuring out the specific numbers later.
Within benefits, we also discussed the issue of accumulated sick leave. The TA very
quickly expressed that they did not want any changes to the current policy of ten days of sick
leave per year. We proposed three days per year and in exchange, we would provide monetary
compensation. However, the Association responded that realistically, three days is not sufficient
even if we provided monetary compensation. At this point, it seemed like we were hitting a
standstill on most of our issues. As a result, we took a short five-minute break to convene with
our teams, and came back with another proposal. The board proposed that the teachers could
have their ten days of sick leave, but in exchange, we would reduce the maximum amount of
$7,500 for accumulated sick days upon retirement down to $4,000. Additionally, the TA brought
up that as of now, retired teachers can cash out 25% of their sick days upon retirement, to which
they offered they could possibly decrease to 13%, if they could have a salary increase in return.
To conclude our day, we negotiated on the subject of binding arbitration regarding
employee grievances. The TA first mentioned that when a teacher files a grievance to the Board,
they want the negotiation between the Board and Union to be witnessed and decided by an
impartial third party that the Association approves of. However, we were hesitant to this idea, as
it could tie the board’s hands in deciding how to deal with both legitimate and illegitimate
grievances. In response, the Teachers Association also expressed their hesitation that if the third
party were to recommend something the board disagrees with, the board will begin to treat
teachers unfairly. However, the TA did say that if this wouldn’t be possible, we can compromise
on this issue, as long as they can get something in return. We understood the TAs concern, and
responded that we would be willing to agree to some form of advisory arbitration, just not to a
scenario where a third party makes all the decisions. By this point of the negotiation, it was
evident to our team that the salary increase was the number one priority of the Teachers
Association, and that they would favor a compromise on most issues in order to get a salary
increase.
March 31: Final Negotiation
On March 31th, we conducted our final negotiation in-class. Following our first
negotiation, we had three remaining topics that needed to be addressed with the Teachers
Association including, reduction in staff, workload, and evaluation of teachers. Additionally, we
needed to determine specific figures regarding a potential salary increase and benefits, as we
discussed in our previous meeting. Sofia began the negotiation by bringing up health insurance,
as the TA was originally opposed to the new HMO plan but also wasn’t in favor of raising the
portion of healthcare coverage paid for by the teachers. As a result, they proposed the idea of
switching to the new HMO plan, but not increasing the percentage contributed by teachers. Our
team declined and proposed a 15% contribution from teachers, 75% from the board, which they
declined. We eventually settled on a 14% contribution from the teachers, 86% from the board,
and decided to put it to the side, while we found a good compromise for workload that could also
be applied to the issue of health insurance.
Moving forward, we discussed the issue of workload, proposing that the board was
looking to increase the total length of the present workday by 55 minutes, from 7 hours and 5
minutes to a full 8 hours. First, the TA asked what would be going into that extra hour, to which
we broke down the total 8 hours for them: 7 hours and 35 minutes for teaching and extra
assignments, no prep time, and a 25-minutes for duty-free time. In order to come to a
compromise, we even proposed taking the 55 minutes and allowing the teachers to divide it
within the three categories of teaching, prep time, and duty-free time, in a way that would be
most beneficial to them. However, the TA continued to argue that if we increase the school day,
it’ll actually be more harmful to the students, as it takes them away from extracurricular
activities and they are unsure of how the parents would react. The TA first offered that they
would like to put all 55 minutes towards the teachers’ prep time, even though we suggested
putting the full amount of time into actual teaching. We proposed putting only 10-minutes into
prep time, and the following 45 minutes into teaching. The TA came back with another
counteroffer, stating that they weren’t willing to give up the teachers’ original prep time of 50
minutes or duty-free time. As a last resort, we proposed that instead of 7 hours and 35 minutes of
teaching, we would reduce it to 6 hours and 45 minutes, with 35 minutes for prep time, and 25
minutes for duty-free time, totaling to a 7 hour and 45 minute workday. This proposal also didn’t
seem to satisfy the Association, as they came back with an offer to decrease teaching time by 30
minutes, and increase prep time to 40 minutes, totaling a workday of 7 hours and 35 minutes, to
which we finally agreed. Simultaneously, we also agreed to the teachers’ and Board’s
contribution towards health insurance. We would stick with the traditional insurance plan,
however, the teachers would now be increasing their contribution to 14% of the total annual cost
for health care coverage, while the board contributes 86%.
Within workload, we then discussed emergency assignments and general obligations. The
TA first mentioned that since this was a topic where their demands are very simple, rational, and
don’t have a monetary component associated, they hoped that we could be on the same page. The
TA proposed, if a teacher has to get assigned to an obligation such as cafeteria duty, the board
makes it a rotation-based system, with a one semester maximum time limit before someone else
gets picked. They wanted to reassure us that someone will always be there to do the duty,
however, they also want to prioritize the teachers’ interests and have good morale. We thought
this was very reasonable and quickly agreed. Additionally, the TA then proposed prior to
assigning any duties, a six-week notice is given so that teachers that are interested can apply to
participate in that obligation or duty, which we also agreed to. Since both teams didn’t settle on
this during the first negotiation, we then discussed bereavement leave. The TA mentioned that
they were willing to come to a fair compromise, however, they believed we were low-balling
them so much that it seemed completely unreasonable. During our first meeting, the TA
proposed a total of eight days, six days paid leave for the teacher, and two additional days for inlaws. We counter offered a total of five days, with two of those days being fully paid, and the
remaining three would only be half-paid. The TAs response was expected, they said that if they
were going to make that concession, they needed an appropriate increase in salary. Since we
weren’t making much progress at this time, we decided to move forward with another topic and
asked the TA if they would be comfortable agreeing to two topics simultaneously, similar to
what we did for the bereavement days and health insurance.
Moving forward, we discussed binding arbitration, which also wasn’t resolved from our
first meeting. To remind us, the TA mentioned that our proposed agreement was that an impartial
third party is present during grievance hearings, however, the Board still makes all final
decisions. However, in exchange for giving the board that power, they were again asking for a
salary increase. We then proposed another idea, where if the teachers aren’t happy with the
Board’s decision, they could appeal the decision with a statement from the third party, and the
case could be reopened. However, the TA was still concerned that even if it was appealed, the
board would still be the one making the final decision. We took a five-minute break to convene
with our teams, and discuss another idea to bring to the table. We suggested that a group of three
advisors could make the decision to appeal, if needed, and eventually, if the case is reopened, the
board won’t have any say and it can be given to the State, who would ultimately make the
decision. The TA was appreciative that we were addressing their concerns, however, they were
concerned with the feasibility of this idea, considering the massive backlog in litigation cases
within the State. Eventually, the TA suggested that they would agree to our initial proposal, if
they can get a salary increase. At first, they were asking for a $2,000 increase, as a part of the
total $10,000 salary increase they were looking for. After a few back-and-forths, we agreed that
the Board will make all decisions regarding employee grievances and arbitration procedures,
with an impartial third party present, in exchange for a $1,500 salary increase. Additionally, in
order to get them to agree to both at once, our group quickly brought up bereavement leave and
asked how much they were looking for in terms of monetary compensation, to which they
responded $700. We negotiated the amount down to $600, for five total days of bereavement
leave, two of which are fully paid, and remaining three are half paid, to which we both agreed.
We then began to negotiate the specifics on accumulated sick leave. During our first
meeting, the board had proposed decreasing the maximum amount of $7,500 for accumulated
sick leave upon retirement to $4,000. However, the TA mentioned that if we’re reducing the
amount to $4,000, they were expecting a $2,000 increase in salary. We proposed a $600 salary
increase, equal to the amount they were already receiving for the bereavement leave. After a few
back-and-forths, we settled on a $1,000 increase in salary. Before moving on, we also
emphasized that for the 20 teachers who are planning on retiring, they will now only receive up
to the new maximum amount of $4,000. In the first negotiation, the TA also brought up
potentially decreasing the 25% of leftover sick days that teachers can cash out upon retirement,
to 13%, in exchange for another salary increase. They mentioned they now only wanted a
decrease from 25% to 16%, however, we remembered their original proposal of 13% and
expressed that they should honor it. They eventually agreed to allow teachers to cash out only
13% of their leftover sick days upon retirement, in exchange for a $400 salary increase.
Next, we discussed evaluation, where we first mentioned that the Board would like the
flexibility to take up to three months to provide teachers’ with their evaluation written reports
and annual performance reviews. The TA quickly responded saying that their hope was one
week, and they’re concerned that if there’s a large gap between when teachers are receiving their
evaluation reports, it will impact their professional development and the ability to do their job.
They eventually proposed meeting us in the middle, in exchange, for a modest salary increase. In
every issue that we’ve negotiated, we were realizing that the TA has used these salary increases
as leverage, to ultimately get the highest possible salary at the end. At this point of the
negotiation, our group desperately wanted to tackle the salary issue as soon as possible and be
able to make an agreement, that way the TA would not be able to use it for leverage in
remaining issues. The TA finally agreed to settle on a salary, and come back to evaluation after.
At this point, the Board had already given the teachers a total of $3,500 in salary
increases ($1,500 from binding arbitration, $600 bereavement leave, $1,000 sick days, $400
accumulated sick leave upon retirement). From the very beginning, our group was aware that the
TA’s proposed increase in salary was $10,000 and that it was far beyond our resistance point,
however, we explained that we were only going to be willing to offer them $4,000, based on the
state’s budget. The TA remained quiet as we explained that if we went above $4,000, we would
then be maximizing the state’s funding and that the salary issue was simply out of our hands. The
TA was at a loss of words for a while, stating that they didn’t believe us that $4,000 is our
maximum amount. However, we explained that the Board/State was even considering cutting
teachers’ salary, and that an increase wasn’t even a possibility. The TA finally told us, “if it was
$5,000, I would say yes”, even though her partner did not seem to agree. As a result, we took
advantage of this weakness, and quickly agreed to the $5,000 salary increase for all teachers,
except for the 20 that would be retiring. We then returned to the evaluation issue, where we
agreed to compromise and give the Board up to one month to get the teachers’ observations and
written reports.
Our last issue was concerning staff reduction, involving pupil to teacher ratio, systemwide reductions in staff, layoffs, and severance pay. The TA first expressed that it would be best
for the teachers and students if the pupil to teacher ratio decreases, whereas the Board wants an
increase. We proposed a pupil to teacher ratio of 15.5, backed by the reasoning that the average
in the country is 15.8. The TA countered with a ratio of 15, to which we both agreed. Next, when
discussing system-wide staff reductions, we expressed that the board wishes to retain as much
control as possible over layoffs, but may provide opportunities for the TA to make informal
recommendations. The TA responded that they would like these decisions to be jointly
determined by the Association and the Board, with an equal number of representatives from both
sides, with the reasoning that the teachers’ also have someone representing them. We thought
this was a fair proposal, and ultimately agreed to the terms. Additionally, we then expressed that
by law, we are not required to offer any severance pay to laid-off teachers. We brought up
aspects including the fact that while private institutions offer severance pay, the Board does not
operate as a private institution. Second, we argued that if two parties are jointly deciding that a
teacher should be laid-off for an appropriate reason, there’s no reason that they should be
receiving severance pay. The TA responded with the point that since we’re also increasing the
pupil to teacher ratio, some teachers might get laid-off regardless, not because they did
something wrong. As a result, we proposed a case-by-case basis, maximum of one-week of
severance pay, to which they agreed.
Statement of Lessons Learned
After negotiating all issues stated in the case, we settled on the best options presented
from both parties. Although not all were happy with some outcomes, we understood that one has
to make sacrifices to reach an agreement.
During our first negotiation, the way we were negotiating shifted after our first meeting
with the teacher association. There was a mutual unspoken agreement on who does what during
the negotiation among our group members. This unspoken rule helped the next meeting go
swiftly regarding each role in our group. Another benefit of
● We asked of their wants first – for us to find a suitable compromise (for us)
● Group meetings (important) to have one goal in mind for each issue
● Always low ball to reach a compromise you like.
● Use previous statements against them ( they asked for 2000 for salary and we
misunderstood, one member agreed on 5000 salary increase the other denied)
● During first meeting we saw the team dynamic and worked the person rather than the
case
● Don’t give out important information from your end, ex. (we don’t want the states
involvement, don’t show previous compromise points first let them talk)
● LET THEM TALK the more they talk there will be a point we can use to get what we
want (
● Ask a lot of questions even though they aren’t important at the moment (we asked about #
of retiring people this year 20)
● Resolve the biggest issue first rather than keeping it for last because everything will be
based on the mast important (salary)
● Always find a compromise that helps you first, keep negative outcomes to a minimum.
● Compromise on one issue to get what you want in another (we compromised on workload
so we get less days bereavement leave)
● Sometimes both parties want the same thing. It is important to find that “thing” by
listening (evaluation?)
● “Conflict is an opportunity not a threat”
● Setting an unrealistic compromise sometimes hurt your real goal ( we made them
compromise on bereavement leave too early latter they used it against us on Health
insurance)
Simulation #1 – Exemplar #1
Preparation
Upon reviewing the simulation facts, I began my process as an agent for Peach
Computers of figuring out the best strategy for getting them out of their financial difficulties by
selling off as many computers as possible for as great of profit as I could manage. To approach
the conflict and create a solid strategy, I needed to identify what my largest problem was. Based
on the information provided, the greatest need is that Peach Computers was in a poor financial
condition. The problem with Peach Computers was situational with an immense amount of
time pressure. They were unable to make the previous payroll and they have bank loans due
within 14 days. Time is a very important factor, therefore getting enough capital to sustain
Peach Computers as quickly as possible is the paramount goal. This was how I used the
preparation, process, and product model to begin my strategic approach to the finding a
solution.
After reviewing the textbook, one thing that jumped out as a helpful tool would be the
Negotiation Checklist (Section 1, Reading 4). This was going to be a good starting point and
allowed me to think through my side of the problem while also trying to anticipate the needs and
wants of Campus Computer Stores. The checklist was also very similar to the selling points
Professor Bailey covered during the debrief of The Used Car exercise discussion during class.
One of my first questions regarding the problem was will it be better to sell more computers for a
lower price or fewer computers for a high price? Additionally, rush delivery will create an
increase in charges. At this point, it was essential to create my target point. I decided to set my
target for 300 computers at $1,000 each with payment in seven days, with the option to sell the
additional 200 units within 30 days at $800. This would equate to earning $920 per unit. While
I did not sit down and visualize my outcome or what the paper contract would look like, this did
give me a good idea and was also well above the minimum of $695 for which Peach Computers
was willing to sell their inventory. Moreover, following the information in Make a List, Check
It Twice (Section 3, Reading 9), I physically wrote down what I would like for Peach Computers
to walk away with. Upon reviewing my information, I felt my goal was specific and
moderately difficult to attain. If I told the representative of Campus Computer Stores that
Peach wanted to sell as many as possible for $700, is that really a challenge? That pricing is
rock bottom for what Peach Computers is willing to sell off their remaining inventory. I felt
heading into the negotiation that we could have a collaborative meeting rather than a
competitive outcome. Peach Computers has stock available to ship and would be able to help
Campus Computers with any supply or inventory needs they may have.
I was trying to figure out what the needs of Campus Computers would be prior to our
meeting. Two different scenarios occurred to me about Campus Computer Stores while working
through the information provided. The first was that Campus Computers is also in financial
distress and needs the sale of the Peach I to stay in business. The second could be that Campus
Computers is experiencing supply challenges and does not have inventory available to sell. The
first problem would be an even bigger problem for Peach Computers since they need an
immediate infusion of cash to continue their operations. The second would be an easy
negotiation, especially since Peach can accelerate their shipping timeframes and hopefully in
doing so have cash in hand sooner.
Another section of the text I reviewed was Solve Joint Problems to Create and Claim
Value (Section 1, Reading 9). Clearly each party in this situation needs something other party
can provide; otherwise, there would be minimal reasoning for the meeting to occur. To solve
each organization’s problem, it would be in the best interest of both individuals to work together
and negotiate a favorable agreement, especially since Peach Computers would like to continue
having a working relationship with Campus Computer Stores. This is where Interest-Based
Persuasion (Section 2, Reading 9) also factors in. If Campus Computers needs a supply of
computers and Peach has plenty to offer, it would be in everyone’s best interest to cooperate and
create favorable terms for the transfer of goods.
Negotiation
The negotiation started off very cordially. Both sides were amenable to working together
to create a favorable outcome in the best interests of each party. Initially, basic information was
being discussed, very similar to the Ask, Listen, and Learn strategy (Section 1, Reading 9)
especially since I was representing Peach Computers and selling units to the other side. How
many computers did Campus Computer Stores need? How much where they looking to spend?
When would Campus Computer Stores like the Peach I computers to be delivered? Basic
information to help both parties come to the table in a cooperative method. The representative
from Peach Computers also provided some answers to the questions from Campus Computers by
Divulging Information Strategically (Section 1, Reading 9). Peach Computers indicated that
they had plenty of inventory available to meet the needs of Campus Computer Stores, provided
the standard wholesale price, and gave the customary delivery timeframe. The representative for
Peach Computers also mentioned that because inventory was available, shipping could be
expedited, but it would incur an additional fee.
Some of the initial figures being thrown around by Campus Computers were 300
computers for $1,350 with delivery in 30 days. These numbers were a decent starting point.
From there, Peach Computers mentioned that wholesale is typically around $1,600; $1,595 to be
exact, and Peach would entertain that offer. The representative from Peach Computers also
mentioned that delivery time could be accelerated, however, there would be an additional fee for
expediting the shipping. The baseline price per unit increased to $1,450 with delivery occurring
within seven days. After a discussion back and forth regarding pricing, both Campus Computers
and Peach Computers agreed upon $1,400 per computer for 300 computers to be delivered
within seven days. In The Fine Art of Making Concessions (Section 3, Reading 4), making
concessions in installments would allow for Campus Computer Stores to see that Peach
Computers is flexible in creating a deal that works for both parties involved.
With that deal in hand, Peach Computers still had an additional stock of 200 computers in
inventory. An offer from Peach to Campus Computers for the additional 200 computers for
$1,200 each was rejected. Another rejected offer was for 100 more computers for $1,100. At
this point, Campus Computer Stores stated that they only needed 300 machines. Peach
Computers attempted to continue working on the relationship and offered to send additional
computers in 180 days to replenish the inventory sold by Campus Computers. The
representative of Campus Computers seemed to take notice and offered to take an additional 100
units if the price is discounted to $1,300 each. This would bring the total 400 to computers.
However, Campus Computers could only pay $450,000 for the time being but they were willing
to pay the additional $70,000 in 180 days. The representative for Peach Computers was a little
hesitant to accept the offer given the lengthy repayment period. Campus Computers then
provided another option with a repayment plan of 90 days if it included a discount of 25% off of
the $70,000. This would reduce $70,000 by $17,500 for a total of $52,500. The discount would
allow Campus Computer Stores to purchase the Peach I for a final price of $1,256.25 per
computer. Both Peach Computers and Campus Computer Stores were satisfied with this final
offer.
Results
Peach Computers would supply 400 Peach I computers to Campus Computer Stores for
$1,300 per unit. Campus Computers would pay $450,000 same day. The additional $70,000
will be provided in 180 days. However, Peach Computers was able to negotiate the remaining
amount to be paid at a 25% discount within 90 days, which equals $52,500. This resulted in
Peach Computers selling 400 Peach I machines for $1,256.25 per item.
A few things came into play during the discussion. The first being the Dilemma of
Honesty. Should I have told Campus Computers how desperate Peach was for cash? Should I
divulge how dire the situation really is, that Peach Computers was unable to make payroll?
Could I trust everything my counterpart was saying? Were they just trying to get my bottom
dollar price? Was it possible Campus Computers did not have the funds for 180 days or was this
a ploy to take the computers, keep their money, and run? Were they in financial trouble and
would be going bankrupt before they could pay Peach Computers?
In additional to the Dilemma of Honesty also comes the Dilemma of Trust. Would I be
able to trust the representative of Campus Computers that they would pay the additional $70,000
in 180 days? Would it be better to take a discount of 25% and receive payment in half the time?
Was Campus Computers also experiencing financial difficulties? Would they be bankrupt in 180
days before they could pay off the remaining balance to Peach Computers?
Another item that came up was the Dilemma of Winner’s Curse. Once I had secured
300 computers at $1,400, which more than exceeded my target point of 300 computers at
$1,000, I had to stop and wonder if that was the best I could do. I had an internal dialogue in my
head asking myself if I could do better; if I would be able to get more. I was experiencing an
intra-personal conflict. Could I sell more computers and offload more of the Peach inventory?
I then decided to see if I would be able clear out more inventory for Peach Computers while also
gaining more capital with providing an offer of an additional 100 computers at an even more
discounted price. When the representative of Campus Computers started pushing back that they
only needed 300 computers, I started to wonder if I had over played my hand. I was able to
maintain my composure and offer it under the guise of needing to replenish inventory that would
be sold while also offering a discount to create repeat business.
Analysis and Lessons Learned
First and foremost, the negotiation is just a discussion. Simply put, it is one side bringing
their perspective to the table to meet with another who may have joint interests at the very heart
of the discussion. I need to calm my mind and focus on the task and issues at hand and not be so
nervous. I need to find my confidence and ask for what I want. Professor Bailey stated that,
“Conflict is an opportunity, not a threat.” At the end of the day, it is just a conversation; lives
are not on the line for this negotiation. The person sitting across from me is just that, a person.
They want the best for their organization just as I want the best for Peach Computers.
I had my target point set before the meeting, and I left the information tucked away in
my notebook so I could refer to it if needed. However, once I found out the information of what
Campus Computers needed, I realized my target point by way of price per item was very low.
My target point for the number of computers to sell was spot on. It would have been nice
to sell all the inventory available, but I think we were able to settle on a decent price for Peach
Computers and clear out 80% of their available stock while also receiving a much-needed
infusion of cash. In the future, it may perhaps benefit me to set a couple different points for my
target; to have a moderately difficult but achievable goal and then a stretch goal. While I thought
my target point was going to be a moderately difficult goal to achieve, it almost seemed too easy
based on how the discussion went.
Another thought after the fact, was did I have too much of a hard line, especially after I
hit my target point of selling 300 computers? Was I too pushy in trying to continue to offload
the additional inventory Peach Computers had on hand? Did I show my hand a little too much
when I kept trying to sell the additional 200 computers? Did I reveal how much financial trouble
Peach Computers was in? I feel that part of my negotiation came off as a little desperate. I may
have covered for it well by saying things such as, “As you sell computers, you will need to
restock your inventory. The Peach I is a great computer, and your customers will appreciate the
quality of the machine.”
Moreover, in looking at the Three Schools of Bargaining Ethics (Section 2, Reading
12), I feel I most identify with the school of thought that negotiating is a game. I feel that not
revealing your precise position can be helpful in getting a fair deal. If I revealed the financial
hardships of Peach Computers, it would be entirely likely that the representative of Campus
Computers would take full advantage of our situation. By not showing my full hand while also
providing what appeared to be a discount off the wholesale price, it looks like Peach Computers
is pleased to make a deal as opposed to desperate to make a deal.
When thinking about the Dilemma of Winner’s Curse, could I have done more? Could
I have sold more computers? Could I have gotten a higher price for the computers I did
negotiate to sell? Did the representative from Campus Computers agree to quickly? Did I play
right into his hand?
Simulation #1 – Exemplar #2
I had the pleasure of working with Andrea Viza on the first-course simulation, Peach
Computers v. Campus Computers Stores. In this simulation, Andrea played the role of Peach
Computers while I played the role of Campus Computers. The opportunity to have had the first
practice negotiation in class during the previous week definitely set Andrea and me up for a
successful attempt at Simulation 1. Ironically, in my Andrea and I were the two who did the
worst during that practice simulation so it was refreshing to see how far the two of us had come
since then. From preparation to execution, it was apparent and easy to compare how a lack of
practice, as discussed in class, can impact a negotiation. Fear of failing (again) and my
performance in the practice negotiation definitely impacted and informed how I prepared and
executed my strategy in Peach Computers v. Campus Computers Stores.
Preparation
SELF: In preparation for Peach Computers v. Campus Computers, I spent A LOT of time
reviewing my class notes. It was very important to me that I not only utilize the material and
strategies discussed in class but that I also implement the reactions and thoughts I had during the
exercises we completed both in and outside of class. For example, after reading the case once
over, I spent time making sure I was self-aware and conscientious. For example, I thought about
my personal conflict style and how that may impact the simulation. Naturally, I know that I
typically approach negotiations with a collaboration negotiation mindset; I wanted to see if
there were opportunities in the case for both sides to partner and solve the conflict by creating
value. However, although this was my initial thought, I couldn’t be sure that this was the
approach that Peach Computers was going to take so my first note and strategy was to be
adaptive and respond to the negotiations in ways that would still allow me to get what I wanted,
my target point. Lastly, I thought about my communication and personality, which would both
be essential in being able to receive the outcome that I wanted. I asked how I would have to
change or conform to my opponent. A quote included in one of Prof. Bailey’s slides mentioned
“You must bake with the flour you have”. Before this simulation, I had had very little interaction
with my opponent but I thought back to our class discussions and made note of her own
personality which was friendly, bubbly, and open. I thought about how knowing this could help
me in the simulation. I used this information to think about how to create trust, cohesion and
enlist emotions during our negotiations. It felt very uncomfortable to “scheme” in this way but
like the Dyad exercise, in this instant, my strategy was to be more cooperative than to compete
because Andrea did not seem like one who would be abrasive during the negotiation.
CASE: I read through the case more than 6 times and highlighted information that would
be essential. On another sheet of paper, I outlined facts, stipulations and penalties, advantages
and probably most importantly my target point. This would be the list of outcomes that I want
to make sure I have by the end of the negotiation. These target points included: 300 units
delivered in 7 days or less and 30 days to make payment to Peach Computers. Additionally,
Campus Computers did not want to pay more than $1400 per unit even though we could afford
to pay as much as $2395 per computer. This was because the Peach I was listed at $1595 and CC
was not paying more than the wholesale price. In addition to target points, I also thought about
penalties that Campus Computer would suffer if it did not get its asks. These penalties included
not receiving exactly 300 units before the school year beginning in 60 days, paying $5,000 in
liquidated damages each day the computers were not delivered, having to abandon the NCC,
having to tell my boss I was unable to fulfill the contract, and possibly losing respect from
community members including the State University or suffer the $500/day liquidated dames.
Additional penalties included losing popularity with State University. I also listed a few
negotiable. These negotiable would be points where I could stand to bend a bit without Campus
Computers being too heavily impacted. For example, I could and would increase or decrease the
price of how much Campus Computer would pay per unit as well as the customary thirty days to
pay for the unit. These were negotiable because since Campus Computers is a national chair, I
knew that I had the cash available and could pay up to $2395 per unit if I did not have the full 30
days. I also prepared a list of questions that I would ask Peach Computers including those about
their product line, their history in the market, how well they knew the community and what their
goals in forming a partnership were. In doing so, I hoped to be able to control and form the
conversation by first learning as much about their background as possible.
Description and Analysis of Actual Negotiation.
At the very beginning and upon our first initial introduction, I was happy to have been
able to confirm all of my initial thoughts and assumptions about Andrea. She was very friendly,
comfortable, and open. I thought about how she might use her personality as an advantage to
build trust and create an atmosphere of friendliness during the negotiation. She did just that. I
was very impressed by how she also clearly implemented strategies discussed during class.
Andrea did things like taking a sip of her drink whenever I asked her a difficult question, she
would add that she had to “follow up with Peach Computers” about negotiable points and even
attempted to answer some of my questions with questions. At first approach, it seemed to me that
Peach Computers also wanted to complete the negotiation by being collaborative, rather than
avoiding or even competing. I appreciated this because it allowed us to discuss our comparison
level, or desired state of outcomes and what we both wanted. It wasn’t plainly said but I was able
to get this information out of Andrea by strategically asking her questions about Peach
Computers, their background, and what their overall goals were in selling these units. In asking
Andrea these questions, she revealed information that may or may not have been in her case but
still gave me some background. For example, she told me that Peach Computers although a small
company really wanted to build a network and launch their new product so that they could be
comparable to companies like Dell. With this information, I noted that the company’s size might
inform how much money power they have so in response, I made it known early that Campus
Computers was part of this large and fancy organization called the NCC, which allowed us to
make purchases using cash payments. Automatically, Andrea was impressed and noted that cash
payments would be appreciated because they were a smaller business.
I thought about the strategies that I could use to help get the desired outcome. One area
that was very important during this negotiation was nonverbal communication. For example,
whenever my opponent would make a comment that was not pleasurable to Campus Computers’
desired outcome I would make a “hm” sound and make a note. After doing this a few times,
Andrea would pick it up and say things like “but if that does not work for Campus Computers,
we could explore other options for you”. Jackpot! Instances such as these made me think about
the interdependent exchange between Andrea and me. I like to think of myself as being an
honest person (most of the time), therefore I had a real dilemma of honesty which then fed my
dilemma of trust. How could I believe or trust anything Peach computers was saying when I
knew I wasn’t being fully transparent myself? Throughout the conversation, I found myself not
entirely lying but not entirely telling the truth either. This appeared in instances where the
conversation required answers that were not easily found on the case sheet we received. For
example, Andrea never asked me why Campus Computers was looking to purchase new units or
who we typically purchased from, so I had to play this upper hand by presenting the information
before she could ask me. I spoke (and lied) about how Campus Computers had plenty of time to
look for new units before the start of the semester being a “whopping 2 months away” and not
necessarily being in a rush. I also told Andrea about looking for new suppliers because Campus
Computers was expanding and wanted to make sure we had enough suppliers to keep up with the
demand. In some ways, this wasn’t false in that Campus Computers was indeed expanding
however, our regular supplier could not make out supply. When asked about the delivery date, I
urged and made clear how important it was to receive the units within 5 days because this would
allow Campus Computers extra time to give the units a trial run, install the appropriate programs
on the units, etc. In a way, it felt dishonest and that is where I battled with the most and dealt
with some intra-personal conflict. I had to remind myself that this information (although not in
the case that was given to us) could be true.
Within this collaborative model of negotiation, it was very effortless for there to be a
flow of information because it did not feel like either of us were concealing or using strategy to
not reveal information (even though we were). We focused on solutions that would allow us both
to get what we wanted rather than focusing on differences. Even with this said, we did hit a few
bumps.
There had been so much rapport built in the beginning of the conversation that there was
a lot of leeway for Campus Computers in the initial offer. For example, I had a pretty large
settlement range I was willing to go as far as price. This was because money spent was not a
large issue for Campus Computers. Andrea did not discuss price at all during the conversation
unless I brought it up, which allowed me to present my offer and for her to counter. I had a
resistant point of $1400 and was very surprised to find that Andrea did not push back when I
made the offer of $1200 (just to try my luck). This made me think that Peach Computers had
their own settlement point and that I was nowhere near their resistant point where they would
have to be firm. This did make me feel a bit of the winner’s curse regret. I instantly used this to
further negotiate down by bringing up points that were earlier discussed. For example, my
“disappointment” in finding out Peach Computers would not permit a payment date of 30 days
out pushed the unit price down by an additional $100!
Analysis in Relation to Predetermined Goals.
Recalling that my target points included being able to purchase 300 units and have them
delivered to State University within seven days even though typical delivery conditions are 30 to
60 days. However, I wanted these units delivered, and to also have the customary thirty says to
pay for the units. Campus Computers was willing to pay $2395 per computer however, the Peach
I cost $1595 wholesale so I wanted to spend no more than $1400 per unit. Failure to complete
this contract may result in a loss of respect from the community and my supervisor as I look to
build up my store as well as $5,000 in liquidated damages each day the units were not delivered.
Lastly, I could not make any future commitment because I do not want to abandon NCC.
Overall, I would say that from my vantage point I was successful because I achieved all of my
hard points and nonnegotiable in my list of target points.
Peach Computers and Campus Computers settled on 300 units delivered within 5
business days at $1100 a unit, to be paid to Peach Computers in up to 20 days. Score! I was able
to significantly lower the cost of the unit from $1595 to $1100 although CC was able to pay up
to $2395 per computer. I also negotiated all 300 computers being delivered in under 7 days.
Although I was not able to receive the customary thirty days to pay for the units, this isn’t a large
hit because as the case mentions Campus Computers has the cash on hand. I scored a contract
under the initial bid and within the necessary amount of time needed to both maintain my
supervisor’s respect as well as set Campus Computers up for future success. I would say that I
was successful during the negotiation because I achieved the target points. I was able to achieve
this by implementing the strategies that we discussed in class. One of the most important
strategies that I decided to use in my preparation was to adapt based on the things that my
opponent mentioned. I had to accept that the whole course of the negotiation could be changed at
any second and to not be married to any particular outcome. It was important that I familiarize
myself with the dynamics of the case and be willing to anticipate my opponent’s moves by
utilizing agile thinking. My strategy of not being abrasive or overly competitive played to my
advantage because Andrea may not have responded well to that conflict style. Additionally, it
would have felt very forced since that is not typically how I manage conflict in the different
areas of my life. Andrea and I recognized the inter-dependence both Peach Computers and
Campus Computers had within this case therefore there was no reason from either of us to
withdraw from the negotiation. Although this was not necessarily and outwardly discussed, it
was understood throughout the negotiation and in both our willingness to “give in” to the others
asks.
All in all, by the end of the negotiation I was very eager to learn what Andrea and Peach
Computers’ target points were. I left the meeting feeling as though I was very successful but
wondered if my opponent had gotten everything she needed to also feel just as successful. I
wondered if both of us went from doing pretty poorly in the practice negotiation to actually
doing well this time around. I look forward to further discussing the case in class and being able
to apply the knowledge and lessons learned to our net simulation!
Simulation #1 – Exemplar #3
Introduction
On Saturday February 12th I met with my counterpart Gabriella Santos from Campus
Computer Stores to negotiate the terms of a computer sales on behalf of Peach Computers.
Eventually, I closed a deal with a total amount of 510,000$ achieving the objective of securing
short terms funds for the distressed finances of my client company. In this paper I will walk
you through my thought process during this negotiation, by relying on the PreparationProgress-Product framework.
Preparation
Walking into this simulation, I wanted to be as prepared as possible. My preparation
started with a careful analysis of the case and the data that supported it. It was clear from the case
that Peach Computers needed cash quickly.
My first step was to run a diagnostic on the negotiation using the conflict diagnostic
model in order to understand whether the negotiation would have been Difficult or
Manageable. Elements that suggested that it would have been a difficult negotiation were the
fact that it was of high significance, probably short-term and zero-sum, with no trusted third
party. Elements that pointed to the opposite were that we had no history and the issue was
focused on interests rather than principles. I expected this negotiation to be competitive, but
with elements of both difficult and manageable negotiations.
My second step was to define a list of objectives for Peach Computers that would range
from the minimum requirements – the lower boundaries of any possible deal – to the best-case
scenario. I thought to use a list of objectives rather than a single objective in order to have more
options and keep my mind open for better deals. I mapped the possible deals according to 3
deals: a minimum viable deal, an ambitious deal, and the best-case scenario.
The “minimum viable deal” for Peach Computers was to sell all 500 computers at 695$
(total deal value: $347,500) to be paid within 14 days. I set this as the very minimum deal I
would agree to, my walk away point. The “ambitious deal” scenario was to sell all 500
computers at the full wholesale price of 1595$ to be paid in cash immediately (total deal value:
797,500$). I set this as my ambitious, but attainable goal objective. The “best-case scenario”
was more loosely defined as any improvement on the “ambitious deal” that (1) would have
provided the same amount of immediate funding (797,500$) by selling less units of
computers and (2) developed a long-term relationship in order to secure a distribution channel
for Peach Computers. Once I laid out my objectives, I was able to determine my
Comparison Level upon which I would evaluate the Outcome of the negotiation.
My third step in preparing for the negotiation was to understand what information was
sensible and I should not have disclosed. I expected this to be a competitive negotiation and,
going in, I really wanted to leverage information asymmetry. I realized that if Gabriella would
have known about our troubles in cash flow and the desperate need of short-term funding for
Peach Computers, she could have bargained on the price and the credit terms, ultimately
forcing me closer to walk-away threshold.
My fourth step was to study my opponent and their resistance points. I wanted to
know who I was dealing with, so I run a quick Google search for her name and found a
Facebook profile. I could not derive much from the profile other than the fact that she was
originally from Brazil. I then started to make suppositions on what the objective of Campus
Computers could be: why is Campus Computers contacting us? I came up with two main
possibilities: either they were interested specifically in our product because of its distinct
features, or they just needed some products for their inventory because of problems with their
current supplier. I derived these hypotheses from the text of the case. The case mentioned that
they probably already had a supplier, so one reason to come to us would have been because of
problems with the current supplier. The case also extensively talked about the distinct features of
the Peach I, and that it was acclaimed by experts and critics, so another reason could have been
that they were just interested in the product. In both cases I had something that they wanted,
so I could use these initial suppositions to gain some leverage during the negotiation.
Lastly, I prepared my initial offer. I decided that I would offer 500 computers for 1595$
and offer a 10% discount for every order above 500 units. I did not want to talk about credit
terms on my initial offer because I did not want to lose the information gap advantage and let
my counterpart know that deeply I cared about that.
Process
On February 12th, on a warm and sunny DC afternoon, I met with Gabriella on GWU
campus to finally negotiate our deal. She arrived early, got a conference room and I joined her
shortly after. She appeared very welcoming and polite, we introduced ourselves with a smile
(under the mask) and we engaged in some small talks about our backgrounds, Italy, and Brazil.
Soon after, we started the actual negotiation. My first impression was positive and made me
think that I was dealing with a reasonable and good-hearted person. The immediate second
thought was that she might have been putting on an act to use charisma as a negotiation tool.
To this day I don’t know what the truth is, but I think she was genuine.
Once we set to begin negotiating there were a couple of seconds of stall: neither wanted to
open because nobody wanted to disclose sensible information. I wanted her to open because
after all it was Campus Computer that was coming to us, so I expected her to propose an offer,
so I told her if she had a number in mind. She started with a very general statement of interest
in our products and told me that they were interested in 300 computers, but she did not make an
offer on the price. At this point I decided that it was better for me to open and at least anchor
the conversation with the regular wholesale price of 1595$ for orders below 500 computers. I
thought that she might already have that information since it’s a public price that Peach
Computers charge to wholesale distributors, so I would not be revealing much information and I
would be anchoring the conversation both in terms of pricing and units sold. Once I revealed the
price, she immediately wrote it down. In that moment I understood that she had no visibility on
the price and my anchoring could have been even higher. At this point, I still did not know how
to introduce favorable credit terms in the bargaining mix in order to get the money in half the
standard industry time (within 14days) without raising the suspicion that this could have been
a leverage point for her, so I just waited on her counteroffer.
To my surprise, Gabriella solved this problem for me. In her counteroffer she proposed to
buy 300 computers at full wholesale price of 1595$ to be delivered in 7 days. Of the $478,500
total deal, 20% would have been paid the same day of the negotiation meeting as a down
payment and the remaining 80% on delivery within 7 days. Just with this counteroffer not
only I had already satisfied the minimum amount required by Peach computer but also
improved on that deal value by about 100,000$. I relaxed thinking that I had the upper hand in
the negotiation because I was way above my walk-away point and I was able to introduce the
discussion on credit terms without revealing any information. Meanwhile, by requesting a very
quick delivery she had conveyed information, allowing me to think that they had a urgent
problem of inventory. Her objective now was clearer and I could use that to get some leverage.
I tried to push for a sale of the whole 500 units adding further 200 units in the future
and offering a 10% discount on these additional 200 units with standard credit terms.
Gabriella seemed interested in the deal and in building a longer-term relationship, so she
started crunching numbers to see if the deal was financially feasible. Eventually she told me that
this deal would have been way off her budget and at this point something peculiar happened.
When at the beginning I said that the usual price we charge was 1595$ for 500 computers and
then she would have gotten a 10% discount for orders above that threshold she must have
understood we had a minimum order batch of 500 computers. When she confronted me on
this issue though, I made the mistake of not seizing the moment and I corrected her saying that
we had the possibility to sell less than 500. This was a mistake but once again Gabriella saved me
with a counteroffer.
She proposed to stick with the 300 computers deal but she raised the price from 1595$ to
1700$, basically adding 31,500$ to the pot for reasons I could not really understand. For
what it concerned the future we just agreed to schedule a meeting next week after she had
consulted with the purchasing managers. To this already very appealing offer, I countered asking
to raise the amount of the down payment to 40% of the total deal amount, with the remaining
60% to be paid on delivery. She accepted and we finally closed the deal.
I walked away happy to have sold my computers a full 105$ above the wholesale price,
with still 200 computers in inventory ready to be sold to new customers.
Product
The final deal was the following: I sold 300 computers for a unit price of 1700$ for a total
deal value of 510,000$, 40% of which to be paid immediately at the sign of the contract
as down payment and the remaining 60% on delivery within 7 days.
All in all, this is a satisfactory result, that provided the company with more than
enough liquidity in the short term and accrued fees of about 10,000$ for me in half an hour of
work. That said, the deal I got could be improved in a number of ways. This distance between
the Output and the Comparison level of the alternative is mostly due to mistakes I
committed in the negotiation.
My first mistake was to relax after the minimum requirements objective was satisfied.
Walking into the exercise, I expected that the hardest part would have been a harsh negotiation
on the price and the difficulty of managing sensible information and wielding informational
asymmetry for my own benefit. When Gabriella offered to buy 300 computers at market price
with favorable credit terms and feasible 7 days delivery, I thought that the hardest part was
over and I did not negotiate on prices and conditions. I just tried to add more computers to the
mix by developing a longer-term relationship so that Peach Computer would have a
distribution channel. In reality the deal I settled for was far lower than the “ambitious objective” I
set during preparation. In other words, during the heat of the negotiation I lost sight of my
objective and just cared about staying away from the walk-away point in order to be sure to
reach a deal that the company was in desperate need for. My behavior was still rational but
instead of pursuing the bolder benefit-maximizing strategy I went with a loss-minimization
one.
A wiser approach could have leveraged better the information asymmetry that was
generated between me and Gabriella. Once I know about her resistance point regarding
the quick delivery time, I could have demanded higher prices. In other words, I was well
positioned in figuring out Campus Computers resistance point, but I was not quick enough or
resolute enough to act upon this information asymmetry and translate it into a significant
outcome advantage.
As already mentioned in the previous part, another mistake I made was to miss an
opportunity for option limitation when I resolved the misunderstanding on the minimum
order size. In hindsight, I could have just opened by saying that we have a minimum order
batch of 500 computers, charge the regular wholesale price and take it from there. This would
have anchored the conversation both in terms of price and quantity and the final deal could have
been bigger in size. Notwithstanding this, once Gabriella got the false reading that we had a 500
minimum size batch, I should have just played along and force her into buying the whole
stock. These aggressive negotiation styles however would have probably undermined my
attempts of relationship-building to create a solid distribution channel for Peach Computers.
Finally, to determine whether my negotiation was successful or not we should analyze the
status of interdependent contingencies in the context of the principal agent theory.
According to the principal agent theory I am the agent, and the company is the principal. It
could be argued that we have different objectives that are aligned by the 2% flat commission on
the total deal amount. This flat commission though, aligns our objectives only to a certain
extent. In fact, I am very satisfied with the fee commission of about 10,000$ I have earned in
just half an hour of work even though the upside could have arguably been higher. If Peach
Computers knew about the mistakes I outlined in this paper, it would not be as happy.
That said, in this case I think I set my comparison level even higher than the comparison
level set by the principal. Peach Computer was willing to get a total deal amount of 347,500$
(500 computers @ 695$), and I provided them with a deal of 510,000$ and the potential to
sell additional 200 computers and make even more profits. Under this perspective the outcome
is well above the comparison level. If instead we use as a reference comparison level the
ambitious objective I set during the preparation phase (797,500$ for the whole 500 computers
paid in full as a down payment), we can state that I underperformed, and the outcome fell
short of the comparison level .
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