Claiming Value

Question 1

Conflict preferences

Answer 1

• If parties’ interests are directly opposed
• When one party gains the other loses
• Bargaining situations
• Bargaining zone = Difference in WTP of involved parties

Question 2

Basic elements of bargaining situations

Answer 2

• Best Alternative to a Negotiated Agreement (BATNA) = What you will do if no agreement is reached
• Reservation Point = The worst deal you will accept without walking away (Slightly over BATNA)
• Aspiration Point = The deal you aspire to achieve

Question 3

Anchoring

Answer 3

• Strong (even unrealistic) first offer
• Effective because people rely too much on the first piece of information presented when making a decision
• Usually no big adjustments/corrections from the anchor
• Anchoring by one party has to be responded with counter-anchoring by other party

Question 4

How to use Anchoring

Answer 4

• First offer effect = Final agreements on price are strongly predicted by first offers
• Midpoint bias = Best predictor of final agreements is the midpoint between anchor and counter-anchor

Question 5

Legitimize your offer

Answer 5

• Provide external standards to support offer
• Legitimacy reduces resistance and is key to reputation and relationships
• Legit negotiations can have a sustainable effect on long-term relationships

Question 6

How to neutralize an illegitimate offer

Answer 6

• Focusing on inconsistent (external) evidence eliminates the effects of cuonterpart’s strong first offer (anchor)
• “Where does this number come from?”

Question 7

Chilling Effects

Answer 7

• Reactions that are too far past the counterpart’s reservation point can backfire
• Impasses (Sackgassen), failures to claim value
• Avoid by making strong but legitimate and well-informed offers!

Question 8

When no aggressive first offer

Answer 8

• When unfamiliar with bargaining zone
• When it is socially inappropriate to do so (e.g. job negotiations)
• When you want to find creative solution
• When there is a multi-party situation because they may form a coalition against you
• When your focus is long-termly

Question 9

BATNA or Aspirations?

Answer 9

• Always focus on aspirations because they strongly predict negotiation outcome! (Aspirations should be realistic but high)
• BATNA can weight you down (e.g. trying to beat a weak job offer)

Question 10

Both BATNAs matter

Answer 10

• Because bargaining zone is defined by alternatives of both parties
• Even if your alternatives are weak theirs may be weak as well
• Don’t undersell yourself by focusing on your weak alternatives

Question 11

Should you reveal your BATNA?

Answer 11

• Fully revealing BATNA or reservation point will lead to an offer only slightly better by the counterpart
• Giving to much specifics about BATNA weakens your position but signaling having one is good
• Reveal BATNA only towards the end or if you reach an impasse