Problem 6: Negotiation Flashcards
When do we negotiate?
When two or more parties need to reach a joint decision but have different preferences
decision-analytic approach to negotiations
focuses on how “erring folks like you and me actually behave”
Assessments on three key sets of information:
1. each party’s alternative to a negotiated agreement
2. each party’s set of interests
3. the relative importance of each party’s interests
BATNA
Best Alternative To a Negotiated Agreement
–> what we will do if we fail to reach an agreement
–> the minimum outcome we require of a negotiated agreement
reservation point
the point at which the negotiator is indifferent between a negotiated agreement and an impasse
–> below it, the negotiator would prefer impasse to settlement
–> determined by the BATNA
Claiming Value
slicing the pie or individual gains
positive bargaining zone
a set of resolutions that both parties would prefer over an impasse (overlapping reservation points)
negative bargaining zone
the reservation points of the two parties do not overlap
Creating Value
expanding the pie or joint gain
–> through the process of identifying and adding issues
–> skill differences between parties collaborating on a project often contribute to the partnership’s success
–> complementary skills create the opportunity to make trades in work allocation, to the benefit of both parties
Creating Value through Bets
Four ways in which contingent contracts/bets can improve the outcomes of negotiations:
1. bets build on differences to create joint value
2. bets help manage biases
3. bets diagnose disingenuous parties
4. bets establish incentives for performance
Tools of Value Creation
Build trust and share information
Ask questions
–> by asking questions you increase the likelihood of learning critical information that will allow you to find wise trades
Strategically disclose information
–> share information incrementally, back and forth
–> behaviors in negotiation are often reciprocated
Negotiate multiple issues
–> the relative importance of each issue to each party only becomes apparent when the issues are discussed simultaneously
–> packages of issues
Make multiple offers simultaneously
–> allows you to come across as a flexible negotiator
–> signals that you are willing to be accommodating and that you are interested in understanding the other party’s preferences
Search for post-settlement settlements
Best Practices in Negotiations:
1 - Be Prepared
advantages: understanding own interests and BATNA, evaluating other party’s offers more effectively/efficiently, understanding the nuances of the concession-making processes, achieving negotiation goals
Best Practices in Negotiations:
2 - Diagnose the fundamental structure of the negotiaton
negotiators should make a conscious assessment about whether they are facing a fundamentally distributive negotiation, and integrative negotiation, or a blend of the two, and choose their strategies accordingly
Best Practices in Negotiation:
3 - Identify and work the BATNA
–> have a strong BATNA
–> be aware of the other negotiator’s BATNA
Best Practices in Negotiation:
4 - Be willing to walk away
be willing to walk away from a negotiation when no agreement is better than a poor agreement or when the process is so offensive that the deal isn’t worth the work, or you don’t trust the other party to follow through
Best Practices in Negotiation:
5 - Mastering the key paradoxes of negotiation
paradoxes - seemingly contradictory elements that actually occur together
–> strive for balance in these situations
Claiming Value vs. Creating Value
Sticking by your principle vs. Being resilient enough to go with the flow
Sticking with your strategy vs. Opportunistically pursuing new options
Being too honest and open vs. Being too closed and opaque
Being too trusting vs. Being too distrusting