In some negotiations, you're going to find yourself in a position where the other party has a whole lot more information than you do and that makes for a very difficult negotiation. In particular, you're worried that if you state a price that's too high, they're going to say yes right away. If you state a price that's too low you'll insult them and so whatever you do there's a whole lot of room for things to go south. Let me illustrate this with a rug negotiation that took place in the old city of Jerusalem. I was in the Shook and I found this rug that was fantastic. It was just the right colors, just the right size, it was beautifully hand-knit- as the merchant explained, it was made by seven generations of a Bedwin family, a truly unique artifact and absolutely lovely. And then it came to the question of the price. And the list price of this rug, the little sticker on it says $500. Okay. $500. I have no idea how much this is off. Is it way off? Is it a little bit off? Who can say? And so the guy says to me make me an offer. And I'm afraid to make an offer because, like I say, the rug's worth $500 to me. But if I say 400, he could say yes right away, and next thing you know, I've overpaid. If I say $25 I've insulted him. So I just don't know what to do, and so I'm not willing to say anything. We're drinking our tea. He's coming down a little bit in price, and I'm not prepared to make an offer. Out of frustration he says, you know, this is the finest rug you'll find anywhere in the Shook. You won't get such a good rug at such a good price anywhere else, I guarantee it. And I'm thinking, well, how can you guarantee it? He says, go ahead, borrow this rug and walk around and compare. I think okay, yeah. I'll do that. So, here I am, walking around the old market with a rug on my shoulder. And next thing you know, this kid comes up to me and says, sir, I see that you are a connoisseur of fine rugs. Do you mind if I ask you a question? I say no problem. He says how much did you pay for this rug'? And I say $500. It's $500, you are an expert negotiator. That is a fine rug. Would you like a second rug just like it? I have one in my store. And I go follow him into the store and sure enough there's a rug that must have been knit by the same family, because it looks absolutely identical. Okay, well now I know this is not the only rug like this, I continue walking down the street. Another kid comes up to me and says excuse me sir, I see that you are a connoisseur of fine rugs, do you mind if I ask you a question? And I say, no problem, how much did you pay for this rug? And I say, $300. $300, that's impossible. Is it? No it's not, look I've got the rug right here, he says, okay. In that case, would you like another rug just like that? We have one in my store. I go in the store and sure enough there seems to be yet another identical rug to the one that I'm walking around with. I keep walking down the street and a third kid runs into me, who says, sir I see you're a connoisseur of fine rugs. Do you mind if I ask you a question? At this point I jump in to say, let me guess? How much did I pay for this rug ,yes, exactly! I said $200. $200, that's impossible? I said, no, really, $200. He says, for $200, I'll buy that rug from you. Well, at that point, I can figure out that $200 must really be below his cost, and so I've pushed things too far. So I go to the store right beforehand where we talked about a $300 price, and I say, look, I'm willing to get a second rug, but it's got to be a little cheaper, how about 275. We close the deal and now I have a second rug. So I go back to the first place which lent me the rug, give them back their loaner and all is right with the world. I've got a great rug, at a great price. And here is the lesson for you. When you're negotiating with somebody who has a whole lot better information, it's really dangerous to go and state a price. So what you've got to do is get informed. You have to figure out who has the information that you need. And to get that you have to figure out what it is that you have that they want. And you trade that and thereby get informed and be able to get the right price. Good luck.
