Task 7 - Negotiation Flashcards
Negotiation
Discussion between two or more parties with the aim of resolving a divergence of interests
Four domains of Power in Negotiation
Alternatives (BATNA)
Information
Status
Social Capital
Power in negotiations
Power that negotiator has to achieve success in bargaining situations
-> probability that negotiator will influence negotiation in direction of desired outcomes
BATNA
Best alternative to a negotiated agreement
- > if you have a n altenative, you don’t depend as much on the outcome of the current bargain
- > power comes from value or diversity of alternatives
Information
Having negotiation-relevant information
- market information
- knowledge of cultural practices
- insight into counterparties anxieties or expertise
- > gives bargaining power
Status
Extent to which a negotiator is respected by the counterparty
-> high status: get more value for same offerings, appear more competent and trustworthy
Social Capital
Power in negotiation arising from having established and maintained a large or strong social network
-> facilitates other sources of power
Cultural Differences in negotiation
Western: more likely to rely in information exchange strategy
East and South Asian: more likely to adopt persuasion and offer-making strategy
Trust tendencies
High trust: direct information sharing
Low trust: persuasion and offer-making
Social Identity Theory (intercultural negotiation)
Intercultural negotiations as having highly competitive outgroup-dynamics
Triangle Hypothesis (intercultural negotiation)
Cooperative negotiators will remain cooperative unless facing a competitive opponent (then competitive)
Effects of cultural differences
Can undermine value creation in intercultural negotiations
-> e.g. bank loans have higher interest rates, more guarantee requirements and are smaller interculturally
Trust
Psychological state indicating intention to accept vulnerability based upon positive expectations of the intentions or behaviors of another
-> enables parties to rely on each other in future
Effects of trust
- Strengthens cooperative intentions
- Reduces uncertainty
- Minimizes transaction costs
Trust Propensity
Expectancy that the counterparty can be relied on, even without prior contact, shaped by prior experiences
High trust propensity negotiation behavior
more likely to take leap and signal counterparty about their high expectations of trustworthiness
Integrative/cooperative bargaining
- Q&A: sharing info about interests and priorities
- > risky, only high trust propensitve negotiators engage in it
- > contributes to trust development
Distributive/competitive bargaining
S&O: substantiations and offers
- > about position and influence
- > used by low trust propensity negotiators, might induce reciprocal wariness
Substantiations
All influence attempts that negotiators use to justify own positions and challenge counterparty’s logic, assumption or facts
Trust influences
Signalling vulnerability and using Q&A contributes to trust development
S&O (especially substantiations) jeopardize trust development)
-> trust propensity directly and indirectly predicts trust development in negotiations
Decision-Analytic Approach to Negotiations
Structure of negotiations determiend by:
- BATNA
- each party’s set of interests
- relative importance of each party’s interests
Reservation point
Point of value in bargaining below which a party would not accept an agreement
Positive bargaining zone
Zone in which bot parties would agree
-> overlapping reservation points
Negative bargaining zone
No resolution can occur between the parties since the reservation points do not overlap
Claiming Value in Negotiation
Determination of each other’s reservation point and aiming for a resolution that is barely acceptable for the other party
Creating Value in Negotiation
Trading issues of differential value to different parties based on preferences;
creating value through bets
-> contingent contracts
Contingent contracts
Bets built on differences to create joint value
- > help manage biases: parties can make bet on own biased beliefs
- > diagnose disingenious parties: identifies bluffs and false claims
Tools of value creation in Negotiation
- Building trust and sharing information
- asking questions
- Strategically disclosing information
- negotiate multiple issues simultaneously
- make multiple offers simultaneously
- search for post-settlement settlements
Post-Settlement Settlements
Adjusting/improving settlements after having agreed on them
Pareto-superior agreement
Mutually beneficial agreement done after an initial agreement
- > still during bargaining, not after settlement
- > often done by employing third party
Negotiation Cultures
- dignity cultures: self-worth based on individual achievements (USA)
- face cultures (China)
- honor cultures (Qatar)
Key aspects of negotiation
- Competitive aspiration (desire to gain at expense of counterparty)
- Information sharing
- Insight (level of awareness of counterpart’s concern
- Joint gains (sum of negotiation outcomes)
Significant cultural differences
- Americans: strongest in joint gains
- Chinese: most competitive, use most influence
- Qataris: used more influence than US
Negotiation Biases
- Fixed Pie Assumption
- Framing
- Escalation of conflict
- Overestimating own value
- self-serving bias
- Anchoring bias
Fixed Pie Assumption
When negotiators only think of win-lose but do not consider possible win-win
- > no desire to reach agreement together but both want more than counterpart
- > don’t consider that there might be “multiple pies” that can be divided
Cognitive Trust-Building
Trust based on (objective) attributes
- > e.g. trusting a professors because you believe he/she has been highly educated
- > also built by perspective-taking
Affective Trust-Building
Trust based on personal connection
-> e.g. trusting you mom because she’s your mom
