Salt Harbor: Brims vs Easterly

In this role play I was representing Brims, a chain of coffee shops. I bought a land parcel next to Easterly Inn to open up my shop, but the Inn’s owner challenged my permit to build saying the parcel did not respect the zoning laws. So in the negotiation I was supposed to sell my parcel of land to Easterly in order to buy some other parcel somewhere else.

Our negotiation had three rounds :

1) I made the initial offer, even though I didn’t want to at first, because I wanted to know my adversary’s initial offer. Since he didn’t tell me I tried to ask some questions like “Why are you against me building a coffee shop next to the Inn?” He answered it would block the Inn’s view of the harbor. Before I could ask something else he asked me how much I would be willing to sell the parcel for I had to give him my maximum price: $180,000.

2) He then argued that I had bought the parcel for $100,000 and questioned my initial offer.

3) I then told him that I had bought the parcel 3 months ago, and since then the market value of the land had gone up: $165,000. Although, the real market value was $125,000.

My initial strategy was out the window before I knew it: I could not think of a way of pushing him to make the first offer, so I just made mine. Which was a lot lower than what we would be willing to pay, so basically my cards were on the table and the game was in his favor from then on. This is exactly why I did not want to make the initial offer.

Of course his question about the price value of the parcel of land destabilized me because I was not aware he knew how much I had paid; although I should have considered that when something is for sale it is pretty easy to know how much it costs, so it would be likely Easterly’s owner would have informed himself just in case he had to or wanted to buy it.

However, I think I recovered quite well in the third round. I managed to get the amount I needed to buy another parcel of land. I was a bit surprised that he accepted this offer so quickly thought.

It is only after we “sealed the deal” that we exchanged our strategic information. I then found out I could have asked for much more: in fact, Easterly thought that my land parcel’s current market value was around $200,000. He was also willing to go as high as $350,000 because that was how much it would cost him if I built my coffee shop there and block his view of the harbor.

In the end I would say that we both got a good deal: I got enough to buy another parcel of land, and he paid less than he was expecting to pay. It was a good compromise, except for the fact that I did not take into account the extra $10,000 of associated costs I had to pay when I bought this parcel. I thought this amount was specific to this parcel of land and I did not even think of adding it to the cost of the new parcel of land.

I also miscalculated my BATNA: before going into the negotiation I thought it would be buying another parcel of land. Of course, after analyzing everything my BATNA was in fact keeping this parcel of land and going to court (although that would have cost me $20,000 or more).

In summary:

→ My Strengths:

- making a deal (it is better than coming out of a negotiation empty handed)

- getting enough money to buy another parcel of land

- making a high initial offer (according to my standards)

→ My Weaknesses:

- not adding the $10,000 of associated costs to the price of the new parcel of land

- miscalculating my BATNA

- not being able to think with a “profit making” mentality

- not being able to adapt during the negotiation

- not being able to find out my opponent’s reservation price, and consequently figure out our ZOPA

I find it is more difficult to find out our opponent’s reservation price than to find out their interests. Here it was pretty clear he did not want Brim’s Coffee Shop to block Easterly Inn’s view; we were also told to solely focus on the price so other possibilities were off the table. But the ZOPA will always be uncertain. I know now that the first offer will always be the lowest (if they are buying, or the highest if they are selling) and that I can go up (or down) from there. But I still think we should both ask for the maximum we are able to go (pay or sell) right from the start: write it in a piece of paper and find it out at the same time. Then go from there and reach an agreement. If we are both focused on hiding our reservation price and finding out our adversary’s we will get nowhere.