Negotiations

When there are multiple parties negotiating for the same product, service or whatever there is a temptation to pit the parties against each other. The theory being that they will bid against each other driving the price up higher and higher.

While this does frequently work, it’s not the only methodology nor is it always the best one.

Recently the St Louis Rams offered the number 2 pick in the upcoming NFL draft to other teams who might want to place a bid. The reason they were willing to do this is there are 2 thought to be 2 great quarterbacks in the draft and the Rams feel they are already strong in that position so they were willing to trade down in order to get more players or picks.

Frequently, when parties negotiate, the buyer starts with a low bid, the seller starts with a high bid and through a lot of back and forth negotiations, they try to find a place in the middle to meet. Sometimes it works and they make the transaction, other times it doesn’t work and the transaction doesn’t take place.

From what I have read, the Rams chose to use a different approach. They asked each team who want interested in making the trade to make their one best offer and the best of the offers would be accepted provided it met their requirements. The key to this is once the offers were made, there would be no counter offers or opportunities to match or beat someone elses offer.

The Washington Redskins made the best offer (three first round draft choices and one second round choice) and the trade was made.

Some people felt the Rams might have been able to get even more if they took the Redskins offer and then shopped it around to see if anyone would beat it (and reportedly, one team tried doing just that as they upped their offer when they found out they didn’t make the best offer).

Was this the best way for the Rams to get the most for this pick? Maybe. Might a more traditional bidding contest have generated an even better deal for the Rams? Maybe. The thing to realize is a traditional bidding contest might have also generated a worse deal for the Rams. If all of the other teams interested in this pick had offered a lot less and said they wouldn’t go any higher (which certainly was a possibility) then the Redskins only would have had to beat the other offer and it could have been much worse for the Rams.

Could the Rams had taken another teams offer which was made after they realized the Redskins offer was better than theirs? Sure and it might have brought in more for them this one time but in the future, when they were interested in making another trade, their word would have been worthless.

If you think about it, wouldn’t this be the ideal way to negotiate? When you go to buy a house wouldn’t it be nice to look at the price and be able to say “yes” or “no” and know the list price is the actual price? Wouldn’t it be nice to get rid of the insulting offers (on both sides)?

Some people might love the art of the negotiation, for me, I wish we could get to the point of real pricing. Then I could decide what I’m willing to pay and it really becomes a “yes” or “no” decision.

Just something to think about.

Have a great day!

Lawrence

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