STRATEGIC DECISION MAKING AND NEGOTIATION (MM5009)

Final Assignment of Negotiation Class :

NEGOTIATION OF BICYCLE’S PRICE DURING COVID-19 PANDEMIC

Nama : Hasbi Asidik

NIM : 29120131

BLEMBA – PERTAMINA CIREBON CLASS

INSTITUT TEKNOLOGI BANDUNG

2021

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 NEGOTIATION
OF BICYCLE’S PRICE
DURING COVID-19 PANDEMIC
The author wrote this case solely to provide final assignment for negotiation class by
Prof. Utomo Sarjono Putro as a part of Strategic Decision Making and Negotiation
(MM5009) Class in School of Business and Management, Institut Teknologi Bandung.

The author does not intend to describe the effective or ineffective handling
of situations. Authors may have disguised certain names and other
identifying information to protect confidentiality.

ABSTRACT
In just a few months, the COVID-19 virus has spread to many countries in asia. One of
the country that has impact of the COVID-19 is Indonesia. The Indonesian phenomenon
in the current COVID-19 pandemic era is the increasing of healthy habits. This can be
seen from the number of people who exercise. The sport that is very popular during the
COVID-19 pandemic is cycling.

Everyone wants to buy a bicycle. Not only for relieve stress but also as a new lifestyle
oriented towards a healthy life. The increasing popularity and high public interest in
buying bicycle resulted in a shortages of stock. This condition has a direct impact on
bicycle prices, which have increased drastically. Price released from interest of bicycles in
Indonesia from march to June 2020, which recorded an increase of up to 900%.

My name is Hasbi. i worked as an employee of an oil and gas company and bought my
first bicycle for 20 million. I plans to buy my second bike. The bicycle was bought for my
wife so we can exercise together.

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NEGOTIATION
I am someone who is very thorough before buying things. No exceptions including my
first bike. However, because the plan to buy my second bicycle is for my wife and she
had asked me many times, i immediately invited my wife to come directly to the bicycle
shop. The plan is to buy her a folding bike. I only had time to ask to my schoolmate
about some good brands of folding bikes. I got a list of recommendations for several
bicycle brands, namely Policyling, Indocycling and Healthicylcling. Sorted list of the best
brand. I did not have time to find out the prices of the bicycle brands mentioned above,
only limited to the price range from 8 million to 12 million. My schoolmate said that the
high price was because it was the impact of the COVID-19 pandemic. This is due to the
large amount of interests from buyers resulting in a scarcity of stock in the market.

Long story short my wife and I went to the bike shop on Sunday. I have prepared 10
million (Buyer’s Aspiration Price) to buy a bicycle and its accessories. I went to “ABADI”
bicycles shop. There I saw three brands mentioned by my schoolmate, then I asked the
price of the bikes. The seller provides the bicycle price, namely :

1. Policyling for 11 million (Seller’s Aspiration Price),

2. Indocyling for 9 million, and
3. Healthicycling for 8 million.

I intended to give my wife the best, so I immediately focused on Policycling brand. I bid
on the bike for 8 million (Buyer’s BATNA). The seller did not want to sell at that price.
The seller offered a price of 9.5 million (Seller’s Reservation Price). Since I felt that the
price was still in the range of money I had prepared, I started asking the price of the
bicycle accessories, such as headlights, taillights and the bells. The total price of the
accessories is 1 million. So, if I agrees it will cost 10.5 million in total. This offer was over
budget. I tried to bargain the price from the seller. I tried to offer the bicycle for 8.2
million (Buyer’s Reservation Price). The seller remains at his stand. The seller argue that it
was his last stock (Hardball Tactics). My last bid was 9.5 million for the bike, but I asked
for the accessories to be provided free of charge (Log Rolling). It turns out that the seller
agrees with this term. There was an agreement between the two parties. I started
completing payments and bringing the bicycle and its accessories home.

The next day I borrowed my wife’s bicycle to go to work. In my office, the colleagues
saw the bicycle. Then one of my office colleagues asked about the bicycle price. I was
very excited telling the story. I was very proud because at that price I also got the

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accessories for free of charge. However, my colleagues were shocked when they heard
the price. Evidently, he owned a bicycle of the same brand. He only bought it for only 6
million and had sold it at a used price for 5 million last month. I thought maybe my
colleague bought the bicycle when the price was not high yet and there were still lots of
stocks available. Out of curiosity, I checked my bicycles price on the website. The
website of the official store that close to my city. It turns out that I found that my bicycle
price was only 6.5 million and the accessories price for 600 thousand or 7.1 million in
total price (Seller’s BATNA). I experienced “the winner’s curse”.
RP 8.2 million AP 10 million
BUYER
SELLER
RP 9.5 million AP 11 million

Exhibit 1. Bargaining Zone (ZOPA)

Buyer Buyer's References Seller Seller's References

BATNA 8.000.000 Schoolmate reference 6.500.000 Official store website
RP 8.200.000 Buyer's Offer 9.500.000 lowest Seller Offer
AP 10.000.000 Schoolmate reference 11.000.000 Highest Seller Offer
Negotiation price 9.500.000 + Free Accessories Matches Price 9.500.000 + Free Accessories Matches Price

Exhibit 2. Estimated the BATNA

PROPOSAL OF IMPROVEMENT
From the story above, my experience is called the winner’s curse. The winner’s curse is a
tendency for the winning bid in an auction to exceed the intrinsic value or true worth of
an item.

Several things that made me trapped in this situation were :

1. I bought the bicycle in a hurry to give my wife a gift.

2. I only asked to one person that is my schoolmate.
3. I only visited one store.
4. I did not check on online stores, things that are very easy to do these days.
5. I was wrong in determining the price (BATNA, Reservation Price and Aspiration
Price).

To prevent this incident from happening again, Several things that can be proposed are :

1. Do not buy any item in a hurry especially in abnormal conditions such as the
COVID-19 pandemic.
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 2. If necessary, ask related things to more than one expert.
3. Visit more than one store (the counterparty) for price comparisons.
4. Check prices in online stores or official stores, to set the right BATNA, Reservation
Price and Aspiration Price.
5. After searching for as much information as possible, then determine the true
BATNA, the Reservation Price (RP), and Aspiration Price (AP).

How the above proposals would eliminate traps or improve negotiations :

1. It is important not to do things in a hurry so that things can be done more

sensibly and comprehensively.
2. If you have more information from experts, you can learn more. The more you
can learn, the more able you will be to strike a favorable agreement.
3. Reveal information about the counterparty’s alternatives. Negotiators who set
high aspirations end up with more of the pie than thore who set lower aspirations
(Chen, et. al 2003). Negotiators whose aspirations exceed those of the
counterparty get more of the bargaining zone.
4. Official store prices represent true value. This is very easy to do as most have an
online website or cooperation with several online stores. It help you to set a right
BATNA, Reservation Price and Aspiration Price.
5. When we have the right BATNA, Reservation Price and Aspiration Price, it can
prevent us from getting caught up in buying unreasonable price (the winner’s
curse).

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