Rafael Montalvo and Bruce Stiftel
Two-party distributive negotiation between a developer and a city representative over the amount of money the developer will pay the city to defray costs associated with development
Manatee Townhomes, Inc., has proposed a residential development for a harbor island in Bay City. Before proceeding it must obtain the approval of Bay City's Department of Streets and Thoroughfares. Streets and Thoroughfares will grant approval only if Manatee agrees to pay a sum money in the form of a traffic impact exaction.
In this exercise the two groups meet to determine the amount of the exaction. Manatee wants a low exaction in order to keep its profits high; Streets and Thoroughfares wants a high exaction in order to minimize future tax levies. There is a large zone of potential agreement ($3.8 million to $10 million), but neither side knows too much about the interests of the other side. There are few, if any, opportunities for joint gains.
- Divide the group into teams of one or two Manatee representatives and one or two Street and Thorough-fares representatives. Distribute the confidential instructions, and allow 20-30 minutes for reading the instructions, preparing strategies, and, if there are two-person teams, caucusing with teammates. Allow 30-45 minutes to negotiate the exaction. Debriefing should last for 30-60 minutes.
- This case has a wide zone of potential agreement where each of the parties has reason to misunderstand the interests of the other side. In this sort of situation, the first offer is often powerful in anchoring the decision, but making a first offer that is advantageous to one's own side is difficult without securing information about the other side's true interests.
- This case explores the advantages and disadvantages of sharing information. Since this is a one-issue case with a wide zone of agreement, gaining information about the other side is to one's advantage and revealing information about one's own side is a disadvantage.
- This case presents the opportunity to distinguish between distributive bargaining and integrative bargaining situations, and to consider negotiation tactics that might be useful in each situations.
- Confidential Instructions for:
- Department of Street and Thoroughfares
- Manatee Townhomes
- All of the above
- Teaching note
Anchoring; Bluffing; Information exchange; Interest analysis; Interests, quantifying; Misrepresentation; Offers, first
Development on Bay Island Attributes
|Time required:||1-2 hours|
|Number of participants:||2|
|Neutral third party present:||None|
|Teaching notes available:||Yes|
|Non-English version available:||German, Spanish|