Negotiation Sudoku Follow-up
This week’s schedule
Welcome to Jazz of Negotiation! Today, down below, I’m wrapping up the bargaining power and coalition-building lessons of last week’s STAR-MOON-COMET exercise. On Thursday I’ll set up a very different kind of puzzle. It’s about how truthful you should be when you negotiate. Both those articles are open access. Feel free to share them. And tomorrow for paying subscribers, a new podcast is going up, “Thanks for the Feedback!”
Thwarting an ultimatum
If you didn’t happen to see the Negotiation Sudoku exercise last week, this is the link. And here’s where we left off.
Three parties have been going around in circles trying to figure out how to split the profit in possible joint ventures. STAR, seemingly the most powerful player, knows that the very the best MOON and COMET can do without including him in a deal is $500,000. So STAR has issued this ultimatum:
“Look guys, fair or not, I’m in the driver’s seat. The best you can do without me is $500,000. I’ll bump that up that to $520,000. You two go off and decide how you’re going to split that. I’ll keep the rest, namely $690,00. You’ve got five minutes to give me your answer. The clock is ticking.”
I asked Jazz readers how they’d advise MOON and COMET to respond. Do they have to cave in?
Thanks everyone for your comments! Sahil Patel got his suggestion in quickly. It came in two installments. In the first one, he said:
MOON and COMET should collude. Demand $550,000 or walk away. Star gets nothing by herself. The key is they have to have the backbone not to cut a side deal with STAR.
Note Sahil’s point about “backbone.” For this gambit to work, MOON and COMET must have an ironclad contract not to defect. And it’s essential that STAR recognizes that.
Yes, MOON and COMET are running the risk that STAR will reject their demand. But if so, they’d only miss out on an additional $20,000, call that $10,000 apiece. Not optimal, of course, but if excluded, STAR would end up with zero—a much higher price to pay. My bet is that STAR will be the one to blink.
Then, after Sahil had thought a bit more about it, he upped the ante:
If MOON and COMET want to be aggressive, they can collude and demand $690,000 effectively flipping the tables on STAR. However, they risk wounding her pride (even though her payoff at $520,000 still exceeds the $0 STAR will get if MOON and COMET both walk away).
That might work, too, so long as MOON and COMET are locked into their partnership. But note Sahil’s observation about how emotion (pride) can creep into decisions that might seem purely monetary. When things get contentious, some people willingly swallow big losses if they believe they can make things even worse for their opponent. (Just think about protracted lawsuits.)
Two other bargaining-power takeaways from this Negotiation Sudoku exercise:
1. If you’re in STAR’s position, good for you, but think twice about throwing your weight around.
2. And if you’re in COMET’s position and think you’re weak, that’s a self-fulfilling prophecy. Look for alternative deals that will enhance your leverage.
Housekeeping
The purpose of Jazz of Negotiation is to make you a more effective negotiator. For details, click here. Just by signing up, you’ll get free access to a full article, plus a shorter post, delivered by email 50 weeks a year. Paid subscribers get additional content: Q and A threads, videos, and from time-to-time short exercises, with more to come.
Thanks! Mike