Don’t check the spelling above. It is a hybrid of negotiation and auction. The author, who holds dual Professorships at Harvard in Law and Economics deliberately chooses the unwieldy term because his aim is to combine the existing theory and practice across these two areas which are often treated in silos or positioned as either/or choices. The two fields are about the transfer of assets but have developed separately.
Auction theory has its roots in microeconomics and game theory and has become an area of intense academic interest with algorithms being developed to test hypotheses. Negotiation theory has become increasingly influenced by social psychology and behavioural economics with a focus on applied approaches to guide practitioners. Given the inherent overlap of interest Subramanian has attempted to build a unifying theory and provide practical insights using real world examples. These provide a proving ground for the academic’s theories.
The book outlines the major features of negotiations and auctions and in Chapter 3 provides some guidance on when to auction and when to negotiate. He makes the point that pure auctions provide no potential for value creation and when relationship, quality service delivery and execution. The author charts the decline of e auctions and attributes the failure to deliver any value other than price. If there is a need for speed and an appetite for risk then the auction could be the solution. The chapter provides a useful matrix that charts Bidder Profile, Asset Characteristics, Seller Profile and the Contextual Factors against auction and negotiation. Using the matrix it is obvious where there are a large number of bidders, a well-defined asset, speed is necessary as is transparency of process is important then an auction should be chosen.
Subsequent chapters cover the variety of auction models that are available and the design requirements to ensure good outcomes from these models. Real world examples are used to illustrate good design. The book also provides an analysis of ways that bidders can use a variety of strategies to improve their chances when they have to work with a process designed by the seller.
The author proposes a hybrid model, negotiauction, which combines across the table pressure (seller) and same side pressure (other bidders). For the hybrid to work the following elements must be present:
- Several (but not too many) buyers
- Asymmetric information
- Ambiguity around process setter and process taker roles
- One-on one meetings that resemble standard negotiations
- One or more rounds of bidding and other forms of direct competition among potential buyers that resemble auctions.
The final chapters cover setup moves and shut down moves for buyers and sellers and the discussion of the legal constraints on behaviours in these processes.
The book charts important new ground in unifying theory and real world practice and is highly recommended for anyone with a high value asset to sell or those contemplating bidding in an auction.
Published by Norton & Company and available on kindle.