Smartsettle One Simulation – Water

Fortunate Farmers Water Case

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Smartsettle One is optimized for the simplest single-issue cases and designed to eliminate the tedious negotiation dance that characterizes most ordinary negotiations. A unique algorithm motivates parties to reach agreement sooner by rewarding the party that is most generous. The following narrative illustrates a simulation in which Smartsettle One is used by two parties to reach an agreement after just one visit to the negotiation panel from each of them.

The context for this simulation is a negotiation between a Potato Processing Company and Farmers that grow the potatoes. Company has been using water from the nearby river and      polluting it with the waste so much that potato yields have decreased. The parties have tentatively agreed that Company will recycle some of the water in order to reduce pollution. The parties have been invited to use Smartsettle One to negotiate the percentage of the water that will be recycled. Prior to beginning their negotiations with Smartsettle One, a Smartsettle Facilitator helps the parties draft a Framework for Agreement. Parties consult with their lawyers to ensure that the wording is clear and concise. (Click here for a more detailed account of the case background.)

COMPANY POINT OF VIEW (click here to skip to FARMERS POINT OF VIEW)

Company is first to arrive at the Smartsettle One negotiation panel. They must first make an Initial Proposal that will be revealed to Farmers. Initial proposals from each party are required to be optimistic in order to create a bargaining range on the negotiation panel. Company must also set a “Walkaway” value. The Walkaway values set by the parties must show that they have similar ideas about the bargaining range. After Company enters their Initial Values, their private bargaining range appears, showing their  Initial Visible Proposal of 24% on the right and their Walkaway of 70% on the left. The Walkaway is never revealed to the Farmers. Company knows that they could manage with 80% but they don’t think that would be fair.

 

 

 

 

 

There is also a yellow flag on the right side with which Company can make a hidden acceptance. To do that, they simply drag the flag to the left and place it on the value that they wish to accept. They decide to accept a value of 64%. That’s nearly as far as they’re willing to go. Yellow shading appears to show all the values that have been accepted by Company.

Company is now waiting for Farmers to arrive. While waiting for Farmers to arrive, Company clicks on the “My Cases” tab to check if any other cases require attention.

My Cases appear.

Company has only one case. The other party still shows absent and there is nothing more to do right now. Company could log off and wait for email to notify them when Farmers arrive, but Farmers happen to arrive before Company leaves. Company notices that they are in the panel.

Back at the negotiation panel, Company sees that Farmers are present (green dot) and have entered their Initial Proposal of 72%. Farmers’ proposal has revealed a red zone below Company’s Walkaway.

Company is still waiting for a hidden concession from Farmers, which  will end Session 1. At the end of a session, agreement is reached if  there is an overlap  among the accepted values. Otherwise, the  negotiation continues with the  next session.

There it is! Farmers have ended Session 1 and an agreement is declared. Company is pleased with the outcome of 60%.

FARMERS POINT OF VIEW (click here to start over with COMPANY POINT OF VIEW)

Following is Farmers point of view. Farmers enter their Initial Proposal  of 72%, which can be seen on the right side.

Farmers think that a fair  settlement would be somewhere between 50% and 70% so they have set their  Walkaway at 50%. At the left end of the red zone, below  their Walkaway is Company’s Initial Proposal of 24%. This seems  rather extreme but Farmers are not that surprised. Farmers end Session 1 by accepting 52%. Wow! They’ve already reached an agreement of 60%. Farmers are very pleased.

Smartsettle automatically generates a complete final binding agreement for download in PDF form. Click here to see the final agreement recording the outcome as 60%.

REWARD FOR GENEROSITY

After seeing this negotiation from each side you know both Walkaways. From that information you can tell that Farmers were favoured by the outcome because they were most generous with their Initial Proposal. The following schematic uses the events in this negotiation to illustrate the unique algorithm used by Smartsettle to reward generosity when there is an overlap among accepted values.

Farmers moved a distance of 20 percentage points from their initial visible proposal of 72% to their hidden acceptance of 52%. Company moved a distance of 40 percentage points from their initial visible proposal of 24% to their hidden acceptance of 64%. The resulting overlap, labeled as the Zone of Agreement, is 12 percentage points. The overlap is divided between the parties in the same proportion as the distances moved by each of them. The resulting agreement revealed by Smartsettle favours Farmers because their initial proposal was more generous.

It’s also interesting to note that it didn’t hurt Farmers to immediately accept a value close to their Walkaway in Session 1.

NO AGREEMENT?

If no agreement is reached in a particular session, parties may continue with another session. Each party may wish to make a visible concession before making another hidden acceptance. If a party has already conceded as far as their walkaway, they would be expected to also declare Final Session.

STILL NO AGREEMENT?

In case of impasse, Smartsettle offers a method of arbitration, that favours the most generous party. An agreement can be guaranteed if parties are willing for Smartsettle to arbitrate the decision.

CONCLUSION

You now know how to use Smartsettle One to complete negotiations in a timely and professional manner. Thank you for supporting Smartsettle and helping us maintain Smartsettle’s reputation as a world leader in eNegotiation technology and innovation.

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