Salt Harbor Case
Salt Harbor Exercise The Salt Harbor exercise was a real world negotiation exercise that added many factors into the decision making. In this exercise, Lukas and I were partners. Lukas was the buyer and I was the seller.
In this negotiation, I had recently purchase some property that I wanted to build into a coffee shop. The neighbor, who is also the buyer, did not want me to build the coffee shop and instead wanted to purchase the property. Lukas stopped me from being able to build the coffee shop through legal channels.
I was given the option to take my chances in court or attempt to tell the property to Lukas and open my coffee shop at another location. ————————————————- This exercise was challenging because, like any real world situation, there was varying degrees of information asymmetry that made negotiating challenging. We were both looking to get more information out of the other person in order to be in a better position to negotiate. What made this exercise even more interesting is that it simulated a real world situation that two people would deal with every day.
This made it easier to understand the underlying implication of the exercise as opposed to the first exercise. ————————————————- My Strategy: My initial strategy was to see what Lukas would offer first before I made a bid. Even though I risked being anchored, I want to gather as much information about him and the decisions he is making before I made my bid. I also made sure to understand the implications of my costs and have a reasonable reservation price that would meet my needs.
I understood the reservation price as the bare minimum I would ever take for the property and therefore put it at 100. I suppose in my mind, I understood the reservation price to include all possible situations. At 100, this would cover the price I paid for the property and allow me to look for another without losing money. My target value was 165. I chose this because 165 were above the range that I could sell the property to a third party and would also allow me to build my coffee shop at a more expensive location without paying an extra dime.
My strategy to come out as even as possible from the exchange and in many ways, I think I ended up giving my opponent the upper hand when I failed to consider that Lukas might want the property even more than I want to get rid of it. My Mistake: My mistake came when I became anchored by the initial offer. When Lukas offered $100 as the initial offer, I thought he was indicating that his limit was really now. I never really imaged that he would offer me such a low value considering how high he authorize to pay for it.
Obviously, had Lukas offered a much higher value, I would have most likely adjusted my numbers and strategy to reflect a much higher selling price. However, given his initial offer, I decided to stick with my strategy and attempt to get $165 out of him. My strategy worked to the exact specifications that I originally wanted. I get exactly my target and in many ways was successful in my negotiation. However, I failed to realize the value that the property had for Lucas and how much higher he would be willing to pay for it.
I was anchored by his initial offer which subsequently affected my offers. At the same time, had I gone first, I believe a similar outcome would have emerged. I most likely would’ve offered 180 in the hopes of getting it down to 165. I believe the reason I was able to so easily achieve my target or what I wanted is because my price was set too low and it became an easy bargain for Lukas. Behaviors: During the negotiation I tried to gather as much information as possible. It was important to me to understand my opponent as best possible.
In these exercises it was easy to negotiate downwards given the friendly nature of the negations. I wanted to find a win-win situation where we were both able to come out of the negotiation feeling good about it. On the other hand, I think Lukas just wanted to maximize his outcome and had no desire to help me win as well. This isn’t necessarily bad in a situation where we would never likely encounter each other gain. I noticed that he was very determined to get the most out of the negotiation.
He made a very low offer which made me think that he had a lower reservation price. In general, the mood of the negotiation was very light hearted and open. We were able to discuss our positions and able to reach an agreement. Lukas and I were able to negotiate an agreement that made me satisfied with the outcome. It was a pleasant negotiation overall. If we were to negotiate again in the future, I would keep the lessons I learned in mind and fight harder to achieve a better than optimal outcome, knowing that Lukas will likely attempt to anchor my offer downwards.
Lessons: The primary lesson that I learned is to watch out for anchors and also to fight harder for my position. This is especially true if a future negotiation is unlikely to happen. I need to try and maximize the negotiation. An anchor is a powerful tool that affects the negotiation. In future, I will consider harder use the anchor effect to my advantage. Another lesson I learned is that how someone feels following a negotiation is surprisingly relative. In other words, a person may feel happier having gained less money than if they gained more money but felt like they could’ve gotten more.
I experienced this phenomenon. I felt very satisfied with the negotiation afterwards, but when I learned that he had a much higher limit and that he made it seem like it was much lower, made me very upset. In a way, I felt like I was lied to or in deceived, even though Lukas did nothing wrong. Having information is only one of the many tools a good negotiator uses to achieve a better result. ————————————————- Grades: Henrique 9, Lukas 9 I feel strongly that Lukas and I did a good job negotiating.
I was able to reach my target of 165 and Lukas was able to get a better deal than what he felt was “good” (200). Overall, it was a mutually beneficial negotiation. The reason I am giving Lukas and I 9s is due to the fact that there’s always room for improvement. We both could’ve gotten a better deal if we were better negotiators. We both tried to implement the tools we learned in class in order to achieve the outcome we wanted and needless to say, we both learned the material well. Lukas used an anchor and I gathered information to understand how much he’s willing to negotiate.