Measuring the Pie
Measure the pie correctly
Measuring the pie correctly is crucial in negotiations, as it determines the value created by reaching an agreement. The pie is measured by the difference between the value created by reaching an agreement and the value created by not reaching an agreement.
- The pie is measured by the difference between the value created by reaching an agreement and the value created by not reaching an agreement.
- The best alternative to a negotiated agreement (BATNA) determines the value created by not reaching an agreement.
- Measuring the pie correctly is crucial in negotiations.
- Determine the BATNA for each sideCalculate the best alternative to a negotiated agreement (BATNA) for each side, including any outside income possibilities or alternative options.Pro tipConsider the time value of money and the potential consequences of delayed agreement.WarningFailing to accurately determine the BATNA can lead to an unfavorable negotiation outcome.
- Measure the pieUse the BATNA to measure the pie, determining the value created by reaching an agreement and the value created by not reaching an agreement.Pro tipBe prepared to negotiate and make concessions to reach a mutually beneficial agreement.WarningFailing to measure the pie correctly can lead to an unfair or unfavorable negotiation outcome.
In a business negotiation, the BATNA for each side is $100,000. Using the BATNA to measure the pie, the value created by reaching an agreement is $200,000, while the value created by not reaching an agreement is $150,000. The pie is measured as $50,000.
The concept of measuring the pie correctly is rooted in game theory and has been applied to various real-world scenarios, including business negotiations and partnership agreements. The idea is that the pie is measured by the difference between the value created by reaching an agreement and the value created by not reaching an agreement.