Negotiations Exam 1 Flashcards
What elements of a negotiation should you consider as a part of your planning?
- Fundamental interests of both parties
- What issues should be on the table
- What sort of stipulations should apply
- What your ranked goals are, and a guess as to a ranking of the other party’s
- What your reservation point is, and what you think the other side’s might be
- What your BATNA is, and what you think the other side’s might be
- Potential “fair” proposals/packages
- A list of questions to ask and questions to expect
- What information is already known, and what leverage results from that from both sides
- What your negotiation strategy is
What is BATNA?
Best Alternative To Negotiated Agreement
What is an aspiration point?
One party’s ideal result
What are potential pitfalls when following aspiration points?
- Underaspiration/”winner’s curse” (too weak, not enough preparation)
- Overaspiring/positional negotiator (too tough)
- Grass-is-greener (only wanting what the other has without knowing what they want themselves)
What are the fundamental elements of any BATNA?
- Dynamic (always changing, and good negotiators should always be trying to improve them)
- Not able to be manipulated by the other party, but should instead only change as a result of objective facts and evidence
What is a reservation point?
A quantification of the negotiator’s BATNA: it includes all terms relevant to the negotiation. Basically, it is your BATNA +/- factors that make you want to do this deal (opportunity costs, switching costs, ego)
E.g., how much you are willing to spend (buyer); least you can accept (seller)
What are focal points?
Arbitrary values that masquerade as a reservation point. Inadequately prepared negotiators tend to focus on these instead of true reservation points.
What is strategic risk?
The riskiness of the tactics that negotiators use at the bargaining table (cooperative vs. competitive, for instance)
What is BATNA risk?
Results in the framing of the BATNA, i.e., to minimize losses vs. maximizing gains - the different mindsets people take as a result of these frames can have a major impact on the result
What is contractual risk?
The risk associated with the willingness of the other party to honor its terms
What is the endowment effect?
The effect that results in a seller, who owns an item, believes it to be worth more than it is worth in reality
What is counterfactual thinking?
Thinking about what might have been but didn’t occur; it is why some negotiations end in regret
What is the sure thing principle, and why do people sometimes violate it?
In the face of uncertainty about whether something might occur, even though a person would prefer X regardless of the outcome, the person defers making the choice for X simply because the existence of uncertainty causes the person to be reluctant to think through the implications of the outcomes
What is the overconfidence effect?
Unwarranted levels of confidence in people’s judgment of their abilities and the occurrence of positive events and under-estimates of negative events
What is a one-shot negotiation?
Where a transaction occurs and no further ramifications accrue to the parties
What is a long-term negotiation?
A negotiation that will continue over time; here, relationships and reputation matter
What is a repetitive negotiation?
Situations in which negotiators must renegotiate terms on some regular basis
What is distributive bargaining?
Where the goals of one party are usually in fundamental and direct conflict with the goals of the other party. Resources are fixed and limited, and each party wants to maximize his share
What are the three reasons why every negotiator should be familiar with distributive bargaining?
- Negotiators face some interdependent situations that are distributive, and to do well in them they need to know how they work
- Most people use the tactics exclusively, and so to be prepared, understanding is required
- Every negotiation situation has the potential to require distributive bargaining skills when at the “claiming value” stage
What is a resistance point?
The other party’s bottom line. Also known as a reservation point.
What are the four main tactical tasks for a negotiator to ascertain in a distributive bargaining situation?
- Assess the other party’s target, resistance point, and cost of terminating negotiations
- Manage the other party’s impression of the negotiator’s same elements
- Modify the other party’s perception of those same elements
- Manipulate the actual costs of delaying or terminating negotiations
What are the different names of integrative negotiation?
Cooperative, collaborative, win-win, mutual gains, or problem solving
What is the distinguishing characteristic of integrative negotiation?
That both sides can achieve their objectives
What traits does a successful integrative negotiator exhibit?
Honesty and integrity
Abundance mentality (look to grow the pie)
Maturity
Systems orientation (how can the system as a whole be optimized for all)
Superior listening skills
What is logrolling?
Where more than one issue is at stake, logrolling can be used by the parties to “trade off” between one issue that the first party receives a highly preferred outcome and the other party receives the same on a separate issue
What are the five ways to establish a win-win option?
- Expanding the pie
- Logrolling (issue trade-off)
- Nonspecific compensation (agreeing to provide/receive things that are unrelated to the issues as a “bonus”)
- Cost cutting (seeking to minimize the costs of the other party to make them more likely to agree)
- Bridging (inventing new options that meet all respective needs)
What are the six factors that facilitate successful integrative negotiation?
- Having some common objective or goal
- Having faith in one’s problem-solving ability
- A belief in the validity of one’s own position and the other’s perspective
- The motivation and commitment to work together
- Trust
- Clear and accurate communication
What are the two main drivers that cause people to fail to ask for what they want?
- Personal characteristics, which are determined by one’s belief in the propriety or appropriateness of such behavior, and the individual’s confidence
- Situational factors, which are dynamic, such as clarity of purpose, salience of outcome, time constraints, perceived alternatives, role, venue, and perceived counterpart
What are the three steps that can be taken to increase the probability of initiating a request and receiving a positive response?
- Mental preparation prior to engagement
- Positioning prior to, or at the moment of, engagement
- Verbal craftsmanship during the delivery of one’s request
What is the definition of negotiation?
Negotiation is the art and science of securing an agreement between two or more interdependent parties who are seeking to maximize their outcomes. The negotiated agreement will guide & regulate their future behavior
What is ZOPA?
The Zone Of Possible Agreement; The ZOPA is the range between the buyer’s reservation price and the seller’s reservation price
What is a positive ZOPA? A negative ZOPA?
Positive = where the buyer is willing to pay more than the seller's minimum Negative = the most the buyer is willing to pay is still short of what the seller will take
What are interests in a negotiation?
Central concerns underlying one’s preferences, e.g., profitability; quality; timing; sense of fairness
What are issues in a negotiation?
Specific items to be negotiated:
Price, delivery date, etc.
What are positions in a negotiation?
Specific outcomes on each issue that each party states, such as I want this price; I want delivery by this date
What are judgmental heuristics?
rules of thumb or shortcuts that people use to reduce information-processing demands
What is the availability bias?
tendency to judge the probability or frequency of events by the degree to which instances of that event are readily “available” or retrievable from memory. Events that (1) evoke emotion, (2) are vivid, and (3) are easily imagined tend to be more available.
What is the representativeness heuristic?
Tendency to assess the likelihood of an event’s occurrence by the degree to which a specific description corresponds or “represents” a broader category (often a stereotype).
What is the anchoring bias?
people make assessments by starting from an initial value and adjusting to yield a final decision, even when the reliability of the initial value is questionable.
What are the two critical processes required for successful planning in advance of a negotiation?
- Goal Definition: What do you want and why do you want it?
- Goal Pursuit: What strategies will help you achieve those goals?
What are the three stages to claiming gains?
Opening Offers
Concession Making
Signaling Commitment
How does trust affect negotiations?
accepting vulnerability based upon a belief in the expectation that another will behave as anticipated
What are the two main different types of trust in negotiations?
Deterrence/Calculus-Based trust
Can I make it irrational for them to defect?
Identification-Based trust
Can we “connect,” feel personally comfortable?
In an integrative negotiation, what is generally safe to disclose, and what is generally best to not disclose?
Generally it’s SAFE to disclose… Issues/Agenda Interests Priorities Use CAUTION when disclosing… BATNA (?) Sources of Power Specific costs/benefits Reservation Prices
What are post-settlement settlements?
Improving the deal for ALL parties after a deal has been reached
Eliminating inefficiencies
Accounting for new information
Parties work from the safety of a negotiated agreement
Enables info sharing and exploration
According to the book “Bargaining for Advantage,” what are the six foundations for effective negotiation?
- Your bargaining style
- Your goals and expectations
- Authoritative standards and norms
- Relationships
- The other party’s interests
- Leverage
According to the book “Claiming Value in Negotiation,” what are the five different strategies to respond to an initial offer?
- Ignore the anchor
- Separate information from influence
- Avoid dwelling on their anchor
- Make an anchored counteroffer, then propose moderation
- Give them time to moderate their offer without losing face
According to the book “Claiming Value in Negotiation,” what are the four factors to consider when making your first offer?
- Keep the entire ZOPA in play
- Provide a justification for your offer
- Set high, but realistic, expectations
- Consider the context and the relationship
According to the book “Claiming Value in Negotiation,” what are the five steps to “push” the other side as far as possible to capture all available value?
- Exhaust all pre-negotiation sources of information
- Identify your assumptions prior to the negotiation
- Ask questions that challenge your assumptions
- Ask indirect questions
- Protect yourself from lies and uncertainty with contingency contracts
According to the book “Claiming Value in Negotiation,” what are the seven effective haggling strategies?
- Focus on the other party’s BATNA and reservation value
- Avoid making unilateral concessions
- Be comfortable with silence
- Label your concessions (make clear that your concession is costly to you)
- Define what it means to reciprocate
- Make contingent concessions
- Be aware of the effects of diminishing rates of concessions
According to the book “Claiming Value in Negotiation,” what are the four preparation strategies for creating value?
- Identify your multiple interests
- Create a scoring system
- Calculate a package reservation value
- Identify the other party’s multiple interests
According to the book “Claiming Value in Negotiation,” what are the three execution strategies for creating value?
- Negotiate multiple issues simultaneously
- Make package offers
- Leverage differences of all types to create value
According to the book “Claiming Value in Negotiation,” what are the seven principles of investigative negotiation?
- Don’t just ask what - ask why
- Seek to reconcile interests, not demands
- Create common ground with uncommon allies
- Interpret demands as opportunities
- Don’t dismiss anything as “their problem”
- Don’t let negotiations end with a rejection of your offer
- Understand the difference between “selling” and “negotiating”
According to the book “Claiming Value in Negotiation,” what are the eight strategies of influence?
- Highlight their potential losses rather than their potential gains
- Disaggregate their gains and aggregate their losses
- Employ the “Door in the face” technique (make an outrageous first request, get denied, then make a request close to what you really want)
- Employ the “foot in the door” technique (aim for compliance with a small request, then increase your demands)
- Leverage the power of justification
- Leverage the power of social proof (“if operators are busy, please call again”)
- Make token unilateral concessions
- Use reference points to make your offers and demands seem reasonable
According to the book “Claiming Value in Negotiation,” what are the five strategies when negotiating without power?
- Don’t reveal that you are weak
- Overcome your weakness by leveraging their weaknesses
- Identify and leverage your distinct value proposition
- If your position is very weak, consider relinquishing what little power you do have
- Strategize on the basis of your entire negotiation portfolio
According to the book “Claiming Value in Negotiation,” what are the three common mistakes made in labeling the other party irrational?
- Hidden interests
- HIdden constraints
- They are uninformed
