BN - Lecture 3: Distributive Negotiations 1

Question 1

Distributive Negotiations

Answer 1

• Used when the parties are trying to divide/distribute something up
• One party gains only if the other party loses something i.e. win-lose situation
• Used to distribute fixed resources such as money, resources, assets, etc. between both the parties
• Goal: for your side to win as much as it can (rather than to assure both sides win), i.e. the other side loses by getting less than it wanted
• Focuses on positions rather than interests
• The parties assume that there is not enough to go around and they can’t ‘expand the pie’
• Zero-sum game that is about claiming value rather than creating value

Question 2

Integrative vs Distributive Bargaining

Answer 2

Integrative bargaining is more cooperative whereas distributive bargaining is more competitive

Question 3

When To Use Distributive Bargaining?

Answer 3

Where the negotiator wants to maximise the value obtained in a single deal and when the relationship with the other party is not important

Question 4

Reservation Price / Walk-Away Point

Answer 4

The reservation price is the least favourable point at which one will accept a negotiated agreement

Question 5

Zone of Possible Agreement (ZOPA)

Answer 5

Each party in a negotiation has a desired outcome and a worst-case scenario, the ZOPA exists between each party’s worst case

Question 6

BATNA

Answer 6

• Establishing a BATNA is an effective way to establish the reservation price
• By establishing a realistic reservation price based on a BATNA prior to negotiation, it can increase the likelihood of a successful deal and also improve one’s confidence and bargaining power.

Question 7

Making the First Offer

Answer 7

• Research shows that the negotiator who makes the first offer comes out ahead
• First offers have a strong anchoring effect in situations of great ambiguity and uncertainty throughout the rest of the negotiation

Question 8

The Anchoring Effect

Answer 8

• Even when people know that a particular anchor should not influence their judgments, they are often incapable of resisting its influence
• As a result, they insufficiently adjust their valuations away from the anchor
• High anchors selective direct our attention toward an item’s positive attributes
• Low anchors direct our attention to its flaws

Question 9

When Not to Make the First Offer?

Answer 9

• When the other side has much more information than you do
• Here you should attempt to level the playing field by gathering more information

Question 10

Concessions

Answer 10

• Parties must make concessions to bring the bargaining range within the ZOPA with goal of ultimately arriving at a settlement point - it draws both sides closer and moves things along
• Don’t give a concession away for free or too early in a negotiation as the other party will feel that they didn’t have to work too hard to get it

1. Label your concessions
2. Demand and define reciprocity
3. Make contingent concessions
4. Make concessions in instalments

Question 11

Psychology of Persuasion

Answer 11

1. Reciprocity
2. Consistency
3. Social proof
4. Authority
5. Likeability
6. Scarcity