Negotiation and Persuasion

Question 1

Distributive negotiations

Answer 1

• Involves fixed-sum games - one person’s gain is another person’s loss
• Almost directly conflicting interests - each party is attempting to maximize his/her share of the fixed-sum payoff
• Simply dividing the “pie”. Goal: maximize slice
However, you don’t always know the size of the pie.

Therefore, you need to prepare by assessing:
	- Goals or Aspirations 
        - Target point
	- BATNA 
Reservation Price

Question 2

Reservation price (Rp)

Answer 2

= the “bottom line”, the point where you are indifferent to whether you achieve an agreement OR walk away.

Reservation price = BATNA +/- transaction costs to enact BATNA

Reservation point should never change unless..

- Your BATNA changes 
- The terms of the deal change 

You should never reveal your Rp to opponents.

Question 3

Bargaining zone

Answer 3

The bargaining zone is the space between the buyer’s reservation price (Br) and the seller’s reservation price(Sr) - that is, the zone of possible agreement.

If Br > Sr, then a zone of possible agreement exists. The zone of agreements is from Sr to Br.

If Br < Sr, then there is no zone of possible agreement.

Question 4

Opening offers have a stronger influence for the final agreement. Why?

Answer 4

Likelihood: Anchoring to the positive

We make assessments by starting off at an initial value based on whatever information is provided and adjust from there to a final decision.

- However, people generally do not make sufficient adjustments 
- Anchors are based on whatever information is available - some of it quite irrelevant.

Question 5

The impact of anchors

Answer 5

Research finding: In negotiations, final agreements are more strongly influenced by initial offers than by subsequent concessionary behaviour.

BUT…

If you make the offer first, you run the risk of undercutting the bargaining zone, potentially leaving yourself with little room to make concessions.

Question 6

To make the first offer or not ?

Answer 6

In general, do your research and make an aggressive first offer:

- Goals predict first offers which predict outcome
- Make your first offer as extreme as you can. Justify or explain it based on your BATNA and goals.
- Consider timing and other side's alternatives.
- Talk about your offer as long as possible.
- The more complex the negotiation, the greater the anchoring advantage.

Question 7

Under what conditions are concessions effective?

Answer 7

1. Allow yourself room to make concessions, but every new concession should be smaller than the previous concessions you have made.
   
   2. Develop a rationale around each of your concessions.
   3. Make concessions only after getting the full list of demands from your partner.
   4. Offer concessions only if your previous concession was reciprocated.

Question 8

Distributive Negotiation Strategies

Answer 8

• Know your BATNA
- Strengthen your BATNA whenever possible
- Highlight the strength of your BATNA without providing specifics
• Define your own reservation price
- Do not reveal your reservation price
• Define your aspiration level
- Focus on your strengths; be realistic but optimistic,

• Research the other party's BATNA/reservation price 
	- Get mote information during the negotiation 
• Make aggressive first offers whenever possible (anchoring advantage)
• Watch how you are making concessions.
• Make sure that concessions reciprocated.

Question 9

Distributive:

Answer 9

• Involve only one issue
  
  • Simply dividing the pie
  • “Almost strictly opposing interests” - each party is attempting to maximize their share of the fixed-pie payoff
  • Involves fixed-sum games - one person’s gain is another person’s loss(win-lose situation)

Question 10

Integrative:

Answer 10

• Involve multiple issues
  
  • Opportunity for enlarging the pie
  • Can increase the benefits available to each side by “capitalizing on differences in parties’ preferences”
  • Always involves a distributive component

Question 11

The Pareto-efficient frontier

Answer 11

• “With any pareto inefficient agreement, there exists an alternative that would benefit at least one party without injuring any party”
  
  • “An agreement is defined pareto efficient when there is no other agreement that would make any party better off without decreasing the outcomes to any other party.”

Question 12

The negotiator’s dilemma: Why integrative negotiations are difficult

Answer 12

Non-separability of integrative and distributive negotiation
- Once value has been created, parties must determine how to divide it up
Value-claiming tactics impede value-creation
- The “fixed-pie bias” leads people to assume that there is always a winner and a loser
- People tend to feel like they have “lost” if the come out of a negotiation worse off than the other person(don’t get an equal share) even if the outcome is above their BATNA.
- But creating value requires sharing information and cooperating which are hard to achieve under fixed-pie biases

In an integrative bargaining situation , "it may be possible for the negotiators to enlarge the pie before cutting it. In order to squeeze out potential joint gains, the negotiators must do some joint problem solving."
· First attempt to integrate
· Then attempt to distribute

Question 13

When are integrative negotiations possible?

Answer 13

Most negotiations involve multiple issues
· Not all parties will care about all issues

Negotiators take position on each issue, but these are based on underlying interests

· Interests define the problem: for a given interests, there are likely to be multiple possible positions 
· Distributive negotiators attempt to find different positions that satisfy the same interests

Capitalizing on differences in parties’ differences

· Differences in priorities
· Differences in risk preference
· Differences in assessed probabilities for future events 
· Differences in time preferences

Trade of differences: when the other side cares more about something that you do, you want them to have it, but “at a price”.

Question 14

Issue by issue

Answer 14

• Become a sequential distributive negotiation

- More contentious

Question 15

Package deals

Answer 15

• Understanding interests and priorities
• Finding issues to trade off - give them what they want and get what you want in return
  Flexibility (real and perceived)

Question 16

Negotiator toolbox: Integrative strategies

Answer 16

· Analyse (1) issues, (2) BATNAs, and (3) reservation prices. Think about (4) interests underlying (5) positions
· Use the negotiations to collect information about integrative possibilities
- Make a proposal incorporating all issues
- Ask what is wrong with your proposal
- Ask diagnostic questions and listen; don’t argue
- Build trust and cooperation - share information (do not disclose your reservation price)
- Trade off when there are differences in preferences
- Be firm in interests, but open to options
- Try post-settlement settlements

Question 17

Decision situation matrix

Answer 17

Table

Question 18

Persuasion tactics

Answer 18

1. Reciprocity: we try to repay in kind what others give to us
   
   • The student could identify with the position of someone in a competing position, or someone in his/her team; this would engender a process of reciprocity.
     2. Commitment: Once we make a choice or take a stand. We will encounter personal and interpersonal pressures to behave consistently with that commitment.
   • Commitments are most effective when they are active, public, effortful, and viewed as internally motivated.
   • As a member of a divided team, the student must discuss his/her commitment to the success of the chosen plan actively, publicly, effortful, and as being internally motivated; this would show that as a team member one would be unlikely to back down.
   3. Authority: we tend to obey to authorities in a mindless fashion
      - There is a tendency to respond to the mere symbol of authority rather than to its substances, e.g. titles, uniforms, status symbols
      - Examples could suggest ways to claim authority away from a boss by showing that the student is knowledgeable about how the process works, the client’s most important needs, or ways to reduce the team’s workload, etc
   4. Social Proof: The greater the number of people who find any idea correct, the more we will perceive the idea to be correct.
      - We use others’ actions to decide on proper behaviors for ourselves under uncertainty and when others are similar to us
      - As a team member, obtaining and showcasing the support of others for the chosen plan would provide social proof of the plan’s viability, increasing perceptions that the plan is more appropriate than the alternative.
   5. Liking: We prefer to say yes to the requests of people we know and like. We tend to like people who are:
      - Physically attractive, similar to us, compliment us, are associated with positive things
      - By remaining calm and appearing impartial. This tactic refers to focusing on asking questions, rather than giving one’s opinion.
   6. Scarcity: We tend to assign more value to opportunities when they are less available
   • Information is potent when scarce/rare, hard to obtain , and/or many must compete for it
   • Limited numbers and time limits
   • audiences tend to assign more value to opportunities when they are less available. For example, an argument about the uniqueness of a product/plan/idea could be a persuasive argument for some team members. This tactic can also be used in reverse, by showing that a unique feature of a competing idea is actually very common.