INB 350
Faculty: ALK
Case Study-Distributive Negotiation
Total Marks: 10
A distributive negotiation will focus on the division of a set amount of resources, largely determined by the aspiration
price (the maximum that party A would like to get, and which is also the least amount that party B would like to pay),
and the reservation price (the least amount that party A would accept, and the maximum that party B would prepared
to pay). Well over 90% of all civil lawsuits in the America are settled out of court, and most are largely resolved through
the application of a distributive negotiation.
On a dreary, rainy night in October of 1968, a young woman was driving behind a lorry truck in the U.S. Perhaps
impatient with the speed of the transport in front of her, the young woman, Ms. Anderson, steered her vehicle to peer
around the lorry driver’s side to see if the way was clear. Before she could react, she was struck head on from an
oncoming vehicle from the opposite direction. The vehicle sustained devastating damages and Ms. Anderson had also
met with critical injuries as a result of this horrific crash. The vehicle repair costs and her hospital expenditures required
minimum $440,000.
Just recently, she had collected her vehicle after necessary repairing, maintenance and servicing tasks performed by
Sorensen Company. Unknown to her, Ms. Anderson did not notice that her front driver’s side headlight was
malfunctioning. The oncoming driver who had struck her had not seen her on that dark misty night when the accident
occurred.
Mr. Miller, lawyer representing Ms. Anderson, held Sorenson Company as being liable for the accident and subsequently
filed a $700,000 law suit against Sorensen Company. $500,000 was the maximum consolation price that Sorenson
Company could pay. Sorenson Company made a tentative offer of $350,000. Miller countered this with a demand for
$650,000. Sorenson Company raised their offer to settle at $400,000. Miller, once again demanded the full half a million,
that is, $500,000. It was not until February of 1973 that Sorenson Company raised their offer to $420,000 which was
rejected, and then raised their offer to $450,000. Miller lowered his demand to $490,000, as a counter offer. This was
rejected by Sorenson Company, and he then lowered it again to $470,000. The time factor was beginning to play on Ms.
Anderson, who was becoming risk averse to the whole negotiation process. In January of 1975, Miller told Sorenson
Company that the ‘bottom line’ settlement that he would accept would be $460,000. Sorenson agreed to the settlement
immediately.
Note: Even though there are three parties here, but you may consider Ms. Anderson and Mr. Miller as one party, and
Sorenson Company as the other party.
Questions
1. What tells you that this case is a true example of distributive bargaining? (3 marks)
Hint: In your answer, you need to provide some major characteristics of distributive bargaining in relation to this
case.
2. Draw one continuum showing the parties’ (that is, Miller and Sorenson Company’s) target points, asking price,
initial offer, reservation points, the counter offers and finally, the settlement price. Use two colored pens-one
for Mr.Miller/Ms. Anderson and another for Sorenson Company, and draw a box around the settlement price.
Also show whether there is a positive or a negative bargaining range. (5 marks)
Make your continuum neat. Mark will be given for neatness.
3. Do you think that the parties should be satisfied with the outcome? Mention the reason why or why not.
(2 marks)