How to Become a Better Negotiator, Second Edition

Area of Agreement

The notion of a reserve price sets up the next negotiating tool: the area of agreement, or the price range within which a deal is possible that will satisfy both parties. To understand this concept, let’s return to the case of our business partners, Oscar and Janis. As sellers, their reserve price is $725,000. Any offer less than that will make them walk away. Now let’s suppose that George, a potential buyer, comes along. He likes their little enterprise and would pay up to $750,000 for it—no more. That’s George’s reserve price.

Figure 2-1 describes the area of agreement in this particular case. Naturally, George will try to get the business for less than $750,000, and Oscar and Janis will attempt to get more than their $725,000 ...