Next negotiation: Tuesday, 23 Sept. - Tuesday, 30 Sept.
Exam date: Friday, Nov 14 2:30-5:30 pm
Today: Critique exercise 5 & Mnookin
How assess the probabilities? Nest?
Diagram and justify
$28,800 mistake, sorry
0 or 30,050 or + 10,000 or + 50,000
Include what have already spent?
Have put $1000 into what turns out to be a bad investment. Can drop and lose money, or put in an additional $500, in which case will get $400 back. Should you do it? What is the appropriate comparison?
What is getting money earlier really worth? Bank interest is only one measure. If you’re not going to put it in the bank, PV is even higher than if based on bank interest (because otherwise would put it there)
HC has cash flow problem, must borrow at 13.5%. If you knew how much money was needed, you could assess it at 13.5% and if any spare, at lesser interest rate.
Translating average result at trial into an LA.
Was this a solely distributive negotiation?
No, some integrative (value-expanding) options
Some pairs, as Mnookin suggests, moved between the net-expected outcome and interest-based (deal-making tables
Hard to expand value much without more information on HC’s needs, WW’s costs, etc.
Options for Mutual Gain
Apology (sometimes in writing, sometimes with dinner)
Promises to give advance notice in future (does this perhaps go without saying?)
Discounts (within reason) are a good idea: WW doesn’t lose money by offering a discount unless a new order is placed, and the discount is not the full amount of their profit on the new order, so they gain. HC also gains, it has the option of cheaper widgets.
A discount on their next order is particularly good, to get HC back into using WW and having a good experience to counter this bad one
Some Options Were a Bad Idea for One or More Clients
Exclusive and preferred contracts. Why would HC agree to be bound to WW given the circumstances? It would take a huge incentive! What if a new manufacturer starts locally? What if there is a new improved kind of widget that WW doesn’t have the patent for? Often there was no obvious incentive (eg guaranteed price or significant discount) for HC.
Endorsement and advertising. Would HC really be happy to endorse WW and advertise themselves as a “satisfied” customer??? Or put a sign on their building sites saying “we proudly use Wonderful widgets in all our building contracts”?!
Remember you can ask me as the client in advance.
Handling Australian Widgets
These were known (in at least one recent case) to be defective.
IF this is never discovered, WW gains a distributive advantage (mitigation argument is possible)
IF it is later discovered, what will the consequences be?
Affect reputation of client (may diminish likelihood of future business)
Affect reputation of lawyer (may increase transaction costs and result in future breakdowns because lawyer’s word is not trusted)