Fortunate Farmers Water Case

(Ver esta página en español)

This is a simple illustration of Visual Blind Bidding applied to a single-issue negotiation using Smartsettle One+. Once you understand how Visual Blind Bidding works in this simple case you will be able to better imagine how the same technique can be applied to negotiations of any shape and size using Smartsettle Infinity.

Smartsettle One+ is optimized for the simplest single-issue cases and designed to eliminate the tedious negotiation dance that characterizes many ordinary negotiations. A unique algorithm motivates parties to reach agreement sooner by rewarding the party that is most collaborative. 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 Single Negotiating Framework. Parties consult with their lawyers to ensure that the wording is clear and concise… more detailed account of the case background.

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

Company is first to arrive at the negotiation panel that has been created with the agreed negotiating range. Company sets the green flag to their initial proposal of 24%. Farmers are expected to arrive shortly and also make an initial proposal. Both proposals will be revealed at that time.

Company also sets a secret acceptance of 64 by dragging the yellow flag to the left. Company signals that they are finished in Session 1. Now they are waiting for Farmers proposal.

Company could sign off and wait for email to notify them when Farmers arrive, but Farmers happen to arrive before Company leaves. Company sees that Farmers are present (green image) and have entered their Initial Proposal of 72%. Company is still waiting for Farmers to end the session.

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. In this case Company is pleased when Smartsettle declares that the outcome is 60%.

 

FARMERS POINT OF VIEW (Start over with COMPANY POINT OF VIEW)

Following is Farmers point of view. Farmers enter their Initial Proposal  of 72% and immediately see Company’s proposal of 24%.

This seems  rather extreme but Farmers are not that surprised given the discussions that have gone on. Farmers end Session 1 after setting a secret acceptance of 52%. Wow! They’ve already reached an agreement of 60% just like that. Farmers are very pleased.

 

Smartsettle automatically generates a complete final agreement for download in PDF form (60% in this case).

REWARD FOR EARLY GENEROSITY

After seeing this negotiation from each side you can see 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 early 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 secret acceptance of 52%. Company moved a distance of 40 percentage points from their initial visible proposal of 24% to their secret acceptance of 64%. The resulting overlap, labeled as the Zone of Possible 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.

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 secret acceptance. If a party has already conceded as far as they are willing to go, they may declare Final Session.

STILL NO AGREEMENT?

In case of impasse, Smartsettle’s Expert Neutral Deal-closer (END) can quickly settle the difference. The middle opinion of fair from three Expert Neutrals is compared to the last secret acceptances of the parties and then Smartsettle declares a settlement that favours the one closest to fair.

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.

Back to the Business Simulations page