Basic Bargaining Model

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 Basic Bargaining Model

x
Buyer ss bs Seller
WAPs WAPb

- 8 10 +

ZOPA
WAPb = Buyer’s Walk Away Point ss = seller’s surplus
WAPs = Seller’s Walk Away Point bs = buyer’s surplus
ZOPA = Zone of Possible Agreement x = Settlement Point

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 How to draw the ZOPA?
JUST TWO RULES:
1) The axis goes from zero to infinity from left to right
2) Each bracket representing the Walk Away Point
faces its owner

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 How to draw the ZOPA?

Buyer This Bracket is facing the buyer; therefore, it is Seller

the buyer’s Walk Away Point

- 1.0 +

JUST TWO RULES:

1) The axis goes from zero to infinity from left to right
2) Each bracket representing the Walk Away Point faces its owner

Oxcam
 How to draw the ZOPA

Buyer This Bracket is facing the seller; therefore, it is Seller

the seller’s Walk Away Point

- 5.0 +

JUST TWO RULES:

1) The axis goes from zero to infinity from left to right
2) Each bracket representing the Walk Away Point faces its owner

Oxcam
 There is no ZOPA in this case

Buyer Seller
WAPb WAPs

- 1.0 5.0
+

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 Walk Away Point
• The Walk Away Point is the limit of the negotiator.
• The Walk Away Point of The Other Part (TOP) is our goal.
• It protects us from making concessions bigger than we can.
• It should protect us from not making enough concessions.

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 Negotiation Dance

B1 B2 B3 S3 S2 S1

- C1 C2
WAPs WAPb +

ZOPA
C1 = First concession x = (B1 + S1) / 2
C2 = Second concession

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