The seller arrives at the negotiations table while reviewing in his mind what he learned at the negotiation seminar, which in the current situation is just to ask an exaggerated high price and only go down very little and as slowly as possible, bordering not getting to the deal.
The buyer sits remembering the advice of a similar course, offering a ridiculously low price and refusing to raise it more than by little sips and very slowly. Twenty years ago, when not everyone had taken a negotiating course, these dilemmas were not as frequent a today.
This may end with no deal or with such a delay as to affect project design time, or the time to check HSE matters properly, or simply delay the date of delivery with extra expenses hard to evaluate.
An article in the Harvard University Journal (HBR Sept-16) by professors Bazerman from Harvard and Kahneman from Princeton proposes a solution: an arbitration. This itself is not new as arbitrations are a widespread and well-known method for resolving conflicts, but it is a way that takes time, effort, and important costs. The arbitration they propose is based on a neutral person not proposing a solution, but choosing one of two alternatives proposed by the respective parties. The referee, as always, must be someone of proven ethics and with a lot of experience in negotiation and business practices.
This encourages the parties to exclude irrational proposals. If the fair price is 5, the seller will start proposing 10 and the buyer offering 2. But if, for example the buyer offers to pay 3.50 but the seller keeps offering 10, the referee will have to choose between those two alternatives: 3,5 or 10. As 3,5 is much closer to the fair price, will be the one chosen. The buyer would be paying 30% below the fair price, thanks to the greedy or irrational seller.
But if both negotiators have understood correctly the mechanics of the process l, none will present irrational proposals, smoothing their numbers to make them attractive. There may even be several quick rounds of submission of bids before submitting them to the arbitrator’s decision.
The proposal seems interesting and applicable to specific cases and could be a contribution from Harvard to the problem they have created themselves with the systematization and diffusion of their negotiating techniques.
On the other hand, the method as mentioned is not new, it was used in ancient Greece to convict criminals. The prosecution proposed a punishment, the defense another one less hard, and the jury had to vote which one seemed most appropriate. It is said that Socrates when the prosecution called for the death sentence, it seemed to him so absurd and exaggerated that he asked for a salary for life. As he believed he was never going to be sentenced to death, he thought he’d found a way to get paid for life. But the jurors were not willing to make that spending and Socrates ended up drinking the hemlock. A lesson for negotiators?
Lear more at section /services oil & gas/https://ideas2invoices.com/en/oil-gas/
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