Problem 6: Negotiation

Question 1

When do we negotiate?

Answer 1

When two or more parties need to reach a joint decision but have different preferences

Question 2

decision-analytic approach to negotiations

Answer 2

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

Question 3

BATNA

Answer 3

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

Question 4

reservation point

Answer 4

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

Question 5

Claiming Value

Answer 5

slicing the pie or individual gains

Question 6

positive bargaining zone

Answer 6

a set of resolutions that both parties would prefer over an impasse (overlapping reservation points)

Question 7

negative bargaining zone

Answer 7

the reservation points of the two parties do not overlap

Question 8

Creating Value

Answer 8

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

Question 9

Creating Value through Bets

Answer 9

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

Question 10

Tools of Value Creation

Answer 10

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

Question 11

Best Practices in Negotiations:
1 - Be Prepared

Answer 11

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

Question 12

Best Practices in Negotiations:
2 - Diagnose the fundamental structure of the negotiaton

Answer 12

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

Question 13

Best Practices in Negotiation:
3 - Identify and work the BATNA

Answer 13

–> have a strong BATNA

–> be aware of the other negotiator’s BATNA

Question 14

Best Practices in Negotiation:
4 - Be willing to walk away

Answer 14

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

Question 15

Best Practices in Negotiation:
5 - Mastering the key paradoxes of negotiation

Answer 15

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

Question 16

Best Practices in Negotiation:
6 - Remembering the intangibles

Answer 16

intangibles –> deep psychological factors that motivate negotiators such as winning, avoiding loss, looking tough or strong to others, not looking weak, being fair, standing by my principles…

–> look for changes in the other negotiator’s behavior to identify intangibles

–> surface the other party’s intangibles by asking open questions

–> surface the other party’s intangibles by taking an observer or listener with you to the negotiation

Question 17

Best Practices in Negotiation:
7 - Actively manage coalitions

Answer 17

Negotiators should recognize three types of coalitions and their potential benefits:
(1) coalitions against you
(2) coalitions that support you
(3) loose, undefined coalitions that may materialize either for or against you

Question 18

Best Practices in Negotiation:
8 - Savor and protect your reputation

Answer 18

a positive reputation gives you a significant competitive advantage

shape the reputation and enhance it

Question 19

Best Practices in Negotiation:
9 - Remember that rationality and fairness are relative

Answer 19

negotiators need to be aware of the tendency that people tend to see the world in a self-serving manner –> in themselves and the other party

Question 20

Best Practices in Negotiation:
10 - Continue to learn from your experience

Answer 20

no two negotiations are identical

analyze each negotiation after it has concluded to review what happened and what could be learned

reflection time
negotiation coaching
diary on strengths and weaknesses

Question 21

integrative style

Answer 21

behaviors that convey information about parties’ interests and priorities

–> value creation –> tools of value creation

Question 22

distributive style

Answer 22

behaviors that try to influence the counterpart to make concessions

–> value claiming
–> focus on the other party’s BATNA and reservation point
–> extreme first offers
–> avoid unliteral concessions
–> be comfortable with silence
–> label confessions
–> make contingent concessions

Question 23

Perceived gender differences in negotiation

Answer 23

women dislike negotiating
women are less likely to initiate negotiations
women report greater anxiety than men about negotiating and are less likely to perceive situations as negotiable

Question 24

Explanations for perceived gender differences in negotiation

Answer 24

backlash –> it might actually be optimal for women to avoid negotiations in situations in which men might benefit from tough negotiation tactics
preferences –> women might simply like to negotiate less aggressively than men or do not know when negotiating is appropriate
cultural precursors –> women and men are raised differently as a result, their preferences are shaped differently
evolutionary basis –> differences in aggressiveness that are not unique to humans

Question 25

Findings of a study about gender differences in negotiation

Answer 25

–> women do not have an inherent, natural disadvantage in bargaining
–> bargaining outcomes across gender can be crucially culture-dependent
–> women have a better understanding of the nature of a negotiation, and they tend to have higher risk aversion
–> giving women more experience in bargaining or related monetary decisions might be quite conductive to enhancing outcomes

Question 26

Culture and Negotiation

Answer 26

–> Eastern and Middle Eastern cultures will place a heavier emphasis on relational outcomes than Western cultures

–> negotiators’ trust and goals influence their strategies, with high trust and cooperative goals promoting information exchange, and low trust and competitive goals promoting persuasion and offers

‘culture-by-context’ perspective
–> culture inclines negotiators to deal with the same type of contextual influences differently

–> reaching any agreement is more difficult in intercultural than intracultural negotiations
- less joint value
- worse economic outcomes
–> cultural intelligence, social goals, and deep multicultural experience appear to facilitate value creation in intercultural negotiations