Value Creation Exercise

I co-taught an Intensive Negotiation course last week (an exhausting 28 credits in one week), and I wanted to do an exercise demonstrating value creation to help dispel the fixed-pie bias. In my smaller, regular negotiation classes, I typically do a Snack Exchange exercise modified from the version created by Jay Folberg. But I didn’t have a lot of time and the number of students would have made that exercise cumbersome (and pricey). So I created a substitute called Seat Exchange. While it didn’t have all the richness of the original, it demonstrated the key point in an efficient way. I thought I would share it on the chance that others might find it useful.

To do the exercise, I first ask the students to rank their preferences on three seat-position parameters: whether they like to be in the middle or on a side; whether they like to be in the front, middle, or back of the room; and whether they like to sit next to a friend or have room to spread out. They indicate their preferences on a form. Then, at the start of the next class, I randomly position them in seats around the room. They then give themselves a point for each parameter on which they received their preferred position. Then we do a round of trades, in which each student can trade seats with one other student. At the conclusion of the round of trading, they again tally a point for each parameter on which they received their preferred position. I do two more trading rounds in the same way. Then I collect all the sheets, add up the points in the initial position, then add up the points for the final position. The exercise is fascinating to watch (smart students will form coalitions and make interim trades so that by the final round they are seated with friends in exactly the spot they want), and there is a big jump from the initial score to the score after three rounds of trades. The students are surprised to see how much value can be created by trading on differences in preference for items that appear at first to be fungible.

If anyone would like the form I created for the exercise, just shoot me an e-mail: kirgisp@stjohns.edu.

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