TASK 7 - NEGOTIATION Flashcards
negotiation
= process in which two or more parties need to reach a joint decision
theories
- game theory
- people act 100% rationally in negotiations
x which is not true
theories
- decision-analytic approach
- give best advice to focal negotiators involved in real conflict with real people
- prescriptive from the focal negotiators point of view
- descriptive from the competing party’s point of view
- structure based on assessment of three key sets of info –> should assess three components before entering any negotiation
1. each party’s best alternative to a negotiated agreement (BATNA) + best estimate of others BATNA
2. each party’s set of interests - positions = what parties demand from the other side
- interest = motive behind those positions
3. relative importance of each party’s interests
primary tasks of negotiation
- claiming value
= slicing the pie, individual gain
- bargaining zone framework: each party has some reservation point (BATNA) below/above which one prefers impasse
- -> positive bargaining zone: reservation points overlap –> give a set of resolutions both parties would prefer over impasse = settlement
- -> negative bargaining zone: reservation points don’t overlap –> no agreement possible
- key skill: determine the other party’s reservation point + aim for a resolution that is barely BUT STILL acceptable to the other party
primary tasks of negotiation
- creating value
= increases size of pie, joint gain
- identifying + adding issues (assessing each parties interests) –> find trade-offs
1) trade something they want more than you for something you care more about in return - -> whenever one party weighs issues differently than the other
- more payoff then just claiming for both
2) contingent/conditional contract
creating value
- cotingent contracts
= conditional; making claim to repay the advance of money you pay at the beginning if you are successful –> if confident about idea enter contract
- if-then agreements = which actions under certain conditions will result in specific outcomes
√ help manage biases
√ diagnose dishonest parties
√ motivation for performance
tools of value creation
- trust relationships
1. BUILD TRUST AND SHARE INFORMATION
= share information with each other about preferences (values they place on different issues)
- -> maximise joint benefit
- easiest way
- building trust useful when cooperative behaviour cannot be interpreted as self-serving
- relationship building increases likelihood of trustworthy/trusting opponent next time
- build trust = be trustworthy
tools of value creation
- trust relationships
2. ASK QUESTIONS
= asking questions (necessary to collect information), not only reacting but listening for new information
- -> understand other party’s interests
- probability of answer is higher if you ask than if you not (no guarantee)
tools of value creation
- competitive relationships
3. STRATEGICALLY DISCLOSE INFORMATION
= give away some information of your own; reveal rather unimportant information
- -> share information incrementally, back and forth
- behaviours are reciprocated: information sharing to reach mutually beneficial agreements
- both parties benefit as parties learn about levels of value; expand outcomes
- minimise own risk: if other party does not share, decide to hold back as well
tools of value creation
- competitive relationships
4. NEGOTIATE MULTIPLE ISSUES SIMULTANEOUSLY
= negotiate multiple issues at once; nothing is settled until everything is settled
- package-offers = deals that cover all the issues and communicate your preferred outcome across all issues
- find out relative importance of each issue to each party –> find favourable, value-creating trades
tools of value creation
- competitive relationships
5. MAKE MULTIPLE OFFERS SIMULTANEOUSLY
= presenting several package-offers; avoid putting an offer on the table before actively collecting information
- -> gain insights/valuable hints where to find trades based on other party’s preferences for one offer or parts
- flexible negotiator: willing to be accommodating, interested in understanding other party’s preferences
tools of value creation
- competitive relationships
6. SEARCH FOR POST-SETTLEMENT SETTLEMENTS
= asking whether other party would be willing to take another look at agreement + see if it can be improved
- -> reach pareto-superior agreement (= agreement potentially even better for both parties)
- third party involvement: negotiator have right to veto, return to original agreement
- both parties can benefit from enlarged outcomes
perspective taking
= understand others cognition - essential management skill √ reduces stereotyping √ more creativity x preferential treatment x project low self-esteem onto other x heighten prejudice x difficult in competitive relationship: 'fight fire with fire' response
power
= probability that negotiator will influence a negotiation outcome in direction of his/her ideal outcome
- HIGH power = higher likelihood of achieving goals
- direct: BATNA, information
- indirect: status, social capital
- -> reinforce each other
- -> fluctuations between contexts, cultures
power
- BATNA
= Best Alternative to a Negotiating Agreement
- strong BATNA: less dependent on opposing party; put pressure on opponent
√ better outcome in markets with higher demands
x anchoring –> satisficing on inferior outcomes
x affect motivation, persistence in striving for ideal targets
- most important
–> in Asia: status and social capital more valuable
power
- information
= market info, knowledge of culture, insight into counterparty’s anxieties, reservation price, general expertise in negotiations
- strategic advantage: leverage that info
- -> ‘doing ones homework’
- -> questions
- -> perspective taking
- -> educated guessing
power
- status
= respect by other side
- LOW status: tend to defer to higher-status counterparts
- HIGH status: more trust, higher payoffs, more interactions
power
- social capital
= who you know + who knows you; vitamin B
- bigger network: improved alternatives, acquire more valuable info, high status people as allies
- -> facilitator of other types of power
bargaining techniques
- distributive bargaining
= negotiations about fixed resources
- competition
- claiming
bargaining techniques
- integrative bargaining
= collecting information about opponent
- cooperation
- creating
biases
- fixed-pie assumption
= thinks that there is fixed proportion one can gain, and one can’t create value
- value claiming too salient
- inhibits search for mutually beneficial outcomes
- incompatibility bias = their interest conflicts directly with those of the other side
- -> win-lose: anything good for them must be bad for me
biases
- framing effects
= context effects; if you see everything as a loss (negative frame) than you will lose either way (mentally)
- negative frames: less likely to make concessions, reach mutually beneficial outcomes
- depends on perceptual anchor –> create anchors that lead the opposition toward a positive frame
biases
- escalation of conflict
= when negotiations become too emotionally loaded
- avoid statements on rigid positions
- sunk-cost effect = if you (emotionally) invested too much earlier, unlikely to go into a lower settlement
biases
- overestimation of own value
= overestimation of chance that the other side will give you what you want (wrongly set BATNA)
- think you can get really good offers
- no positive bargaining zone
- most likely when knowledge is limited
- -> seek objective value assumption from neutral party
biases
- self-serving biases
= see oneself as a fair partner; define what is fair in ways that favour themselves
- think you make really good offers
- different notions of fairness on both sides lead to impasses
biases
- anchoring
= first offers strongly influence your later perception of offers
biases
- egocentric biases
= think others see the world from their view (cooperation, language)
biases
- perception of fairness
= when we perceive as more fair, more willing to negotiate
influences on negotiations
- relational self-construal
= individual defines him/herself in terms of relationships with close others
- higher likeliness of transformation of motivation, willingness to sacrifice in close relationships
- don’t perceive conflict as necessarily having zero-sum, rather as win-win situation
influences on negotiations
- trust propensity
= degree to which a person has benevolent expectations of others, even without prior interaction
- HIGH: more cooperative negotiation (makes you vulnerable); signal to counterpart both, their motivation to trust + intention to build trust via their negotiation behaviour –> contributes positively to trust development
- LOW: less cooperation
cultural differences
- comparative intercultural research
= compares negotiation behaviour and outcomes of individuals from two/more nations or cultural groups
- culture influences which biases, goals, levels of trust to adopt
- ‘culture-by-context’ perspective: respond differently to same kinds of contextual influences
- goal-directed strategies
1. direct, early, sustained information exchange about underlying interests (WEST) - -> value creation
2. persuasion/offer, communicated indirectly/directly (EAST) - -> value claiming
cultural differences
- intercultural research
√ cultural intelligence, social goals for relationship building, concern for face, communication quality –> value creation
x cultural distance, hierarchical concerns
- creating more difficult (reaching any agreement)
- less joint value
- worse economic outcomes
–> have to overcome underlying differences
west vs. east
WEST
- emphasis on economic outcomes
- information exchange strategy
- more value creation
- high trust
- direct communication: “upgraders”
- more obvious dominance
- Americans focus on procedure
EAST
- emphasis on relational outcomes
- persuasion & offer making strategy
- more value claiming
- low trust (more for in-group)
- indirect communication: “downgraders”
- less obvious dominance
- Chinese on outcomes
- stronger in-group/outgroup differentiation-
cultural differences
- improving miscommunication
√ how to express disagreement
√ recognise emotional expressiveness
√ how to builds trust (cognitive vs. affective)
√ avoid yes-or-no questions (mean different things across cultures)
gender differences
= contextually-bound + subject to change
- females: tend to dislike negotiation, less likely to initiate, greater anxiety; evaluated more negatively when negotiating assertively
- males: on average better economic outcomes
- role congruity theory: agentic behaviours usually considered essential for negotiating economic outcomes are not congruent with female gender role
- social role theory: gender roles are composed of consensual beliefs about behavioural expectations related to men’s/women’s roles
–> deviation = social backlash
- reduced:
√ negotiation experience
√ provided with bargaining range
√ advocating for another individual
gender differences across cultures
- patriarchal gender roles (western world) vs. matrilineal gender roles (women inherit economic power; Africa)
- matrilineal females: earn more surplus (have experience in seller role)
- -> bargaining outcomes = culture dependent = women don’t have natural disadvantage in bargaining
zero-sum vs. win-win
1) zero-sum perceptions: if one person benefits, the other must make a sacrifice (either-or strategy of conflict resolution)
2) win-win perception: individuals focus on long-term benefits of sacrificing their self-interest
zero-sum
- interdependence theory
= transformation of motivation; one departs from self-interested goals to make choices that are prosocial or promote the well-being of relationship partners
–> in important relationships transformation of motivation (choices that help partner) - don’t see it as zero-sum but as win-win
norm of the self-contained individual
= independent individuals less likely to sacrifice own interests
- -> choices that benefit the self as necessarily harming the relationship
- -> choices that benefit the relationship as necessarily harming oneself
steps in cross-cultural negotiations (LECTURE)
- exploration learning: try to understand cultural aspects of other party
- preparation for possible risks
- underestimation vs. overestimation of differences - adjusting to counterparts
- develop own rituals
cultural differences
- negotiation styles (LECTURE)
- long-term vs. one time deal
- win/zero-sum negotiation vs. win-win
- informal vs. formal attitude
- direct vs. indirect communication style
- show vs. hinder emotions
- leader vs. group decision
trust (LECTURE)
cognitive: - content + skills based - how professional you look - what information you share affective: - relationship based - can i trust you outside negotiation?
cultural approaches
face: - EAST - interdependent, relying on society dignity: - WEST - individuality - everyone is worth the same honour: - MIDDLE EAST (Arabia…) - focus on one's reputation, what others think of you
