Task 7 - Negotiation

Question 1

Game Theory

Answer 1

Provided by economy school,´
One of the first prescriptive advices to negotiators,
Develops mathematical models to analyze outcomes emerging in decision-making contexts if all parties act RATIONALLY,
focuses on predicting whether or not players will reach agreement, and what nature of agreement will be

PRIMARY ADVANTAGE: (given absolute rationality) it provides most precise and prescriptive advice available to negotiators

DISADVANTAGES:

1. Relies on ability to completely describe all options and associated outcomes for every possible combination (complex)
2. Requires all players act in rational manner (individuals often behave irrationally)

Question 2

Decision-Analytic Approach

Answer 2

Developed by Raiffa (1982,2001),
Focuses on how “erring folks like you and me actually behave”,
Seeks to give best available advice to negotiators involved in real conflict,
GOAL: provide guidance for focal negotiator,
Prescriptive from point of view party receiving advice but descriptive from the point of view of competing party,
Based on assessments of 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 interest
Together these determined structure of the negotiation considers,
Approach considers how rational negotiator should think as well as the common error

Question 3

BATNA

Answer 3

=best alternative to a negotiated agreement
Provides lower bound for determining minimum outcome we require of a negotiated agreement
We should prefer any negotiates agreement that provides more value to us than our BATNA over an impasse,
likewise, we should decline any negotiated agreement with less value

–> logically determines negotiators RESERVATION / indifference POINT: the point at which the negotiator is indifferent between a negotiated agreement and an impasse

Analysis may be difficult, but it will provide better basis for negotiation than intuitive, unprepared assessments

EXAMPLE: rather than buying a specific new car, you may decide to continue to use mass transit. Alternatively, BATNA may be to buy same car from another dealership at a price that you have been offered. In second situation, its far easier to determine reservation point

Question 4

Positions vs. Interests

Answer 4

POSITIONS
= what parties demand from the other side

INTERESTS
=motives behind positions

Negotiators often do not understand other side’s interests

–> focusing on deeper interests can suggest creative solutions

Question 5

Bargaining Zone Framework

Answer 5

=assumes each party has some reservation point below/above which negotiators prefer over an impasse,
When two reservation point overlap, there is a set of resolutions that both parties would prefer over an impasse = positive bargaining zone
–>Optimal for negotiators to reach a settlement

When reservation points don’t overlap = negative bargaining zone
–> No settlement would be acceptable to both parties

Question 6

Value Creation

Answer 6

TRADING ON ISSUES TO CRREATE VALUE
Most important business transactions have opportunity for value creation,
Differences are often opportunities
–> Negotiators should seize every opportunity to create value
–> If other party values something more than you, let them have it (Don’t give it away but trade for something you care more)

Creating value is what rational negotiator does categorically to increase the size of the pie that parties have to split

CREATING VALUE THROUGH BETS/CONTINGENT CONTRACTS
–> can be very effective technique for dealing with differing predictions
-Endowment effect: people commonly overvalue what they own, important for sellers to recognize
EXAMPLE: client who doubts lawyer’s ability to win in court chooses to sign contingent contract that guarantees the lawyer a large payment if case is won, and nothing if it is lost

Number of ways in which contingent contracts can improve outcomes of negotiations for both sides:

1. Bets build on difference 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,
Strategically Disclose information,
Negotiate Multiple Issues simultaneously, 
Make multiple offers simultaneously,
Search for Post-Settlement Settlements

Question 7

10 Best Practices in Negotiations

Answer 7

1. Be Prepared
2. Diagnose Fundamental structure of negotiation
3. Identify and Work the BATNA
4. Be Willing to Walk away
5. Master the Key Paradoxes of Negotiation
6. Remember the Intangibles
7. Actively Manage Coalitions, those against you, for you, and unknown
8. Savor and Protect your Reputation
9. Remember that Rationality and Fairness are Relative
10. Continue to Learn from your experience

Question 8

The Science of Culture and Negotiation

Answer 8

E= East, W = West

CONFRONTATION MODES
E: Prefer less direct modes of confrontation
W: More direct modes of confrontation

DOMINANCE
E: Show less dominance
W: More obvious dominance

ANGER
E: Less comfortable with anger
W: More comfortable with anger

TRUST
E: More trust to ingroup than outgroup counterparts

Question 9

How to Negotiate Across Cultures

Answer 9

1. Adapt they way you express Disagreement
2. Know when to bottle up / Let all pour out
3. Learn how other culture builds trust
4. Avoid Yes-or-No questions
5. Be Careful about Putting it in writing

In the literature list, there is a map that sorts nationalities according to how confrontational and emotionally expressive they are. Although negotiators often believe that the two characteristics go hand in hand, that’s not always the case

Question 10

Dignity, Face and honor Cultures

Answer 10

DIGNITY CULTURE
=self-worth based on individuals achievements in pursuit of goals and values
Doesn’t depend on others’ esteem or assessment of whether role obligations are met,
Autonomy and self-interest,
Take on role obligations, but their obligations are temporally limited
-> as one obligation is fulfilled, people are free to chose new ones
-> Don’t have to follow goals and obligations dictated by belonging group
It is intrinsically determined by people’s own assessments of whether they are meeting their standards and achieving their own goals,
Dignity is not easily challenged by others,

FACE CULTURES
=Self-worth based on others’ assessments of whether the individual is fulfilling stable social role obligations
Not free to act autonomously,
Obligations are socially dictated, not freely chosen and they are ongoing
-> Depend on the individual’s status in stable social hierarchies
-> Lower social status: maintain face by fulfilling their duties and deferring to those of higher social status
-> Higher social status: maintain face by accepting the responsibility associated with their roles and protecting low-status others
Fulfilment of role obligations preserves social harmony and stability

HONOR CULTURES
=Self-worth based on an individual’s reputation and their own assessments of what others think
Much less stable than face cultures,
Reputation for being a moral person, yet someone who is tough and does not let others take advantage of them,
Fulfilling ongoing social roles, but different method
-> Stable hierarchies that characterize face culture: Maintaining face requires deference and duty
-> Unstable and dynamic hierarchies that characterize honor cultures: achieving and protecting honor may require competitive actions to assert and protect not only one’s own reputation, but also the reputation of families or family-like others,
No threat to honor = people may pursue reputation by being vary polite, warm, and hospitable,
Opportunity to gain or a threat to lose reputation = people can be experted to act competively or even aggressively