Negotiation Strategies and BATNA

Decision-Analytic Approach to Negotiations

• A decision-analytic approach focuses on how people actually behave during negotiations, unlike game theory which assumes rationality.
• It uses three key pieces of information: each party's alternative to a negotiated agreement (BATNA), each party's interests, and the relative importance of each party's interests.

Alternatives to a Negotiated Agreement

• A crucial step before a negotiation begins is to determine the Best Alternative To a Negotiated Agreement (BATNA).
• A good negotiated agreement should provide more value than a negotiator's BATNA.
• Negotiators should reject any agreement that provides less value than their BATNA.
• The reservation point is where a negotiator is indifferent between accepting an agreement or not.

Interests of the Parties

• During a negotiation, understanding the underlying interests (not just stated positions) of all parties is vital.
• Identifying interests can generate creative solutions beneficial to all involved.
• It's critical to assess the importance of each issue to both yourself and the other parties.
• Optimal agreements are usually achieved by trading off less important issues to obtain more important one.

Claiming Value in Negotiation

• Strong negotiation skills include determining the opposing party's reservation point.
• Aim for a resolution acceptable to the opposing party, but barely so.
• It's difficult to accurately determine the opposing party's reservation point, and misjudgments can lead to impasses.
• Contingent contracts create value by offering different payoffs based on uncertain future events.
• Examples include a lawyer's fee contingent on winning a case or a higher percentage of book sales for the author.

Creating Value in Negotiation

• Value creation is crucial in complex negotiations.
• Identifying and adding issues during negotiation can increase the total benefit available.
• Single-issue negotiations (like salary negotiations) focus on claiming value, not creating value.

Case Study: Camp David Accords

• The 1978 Camp David Accords demonstrate value creation in negotiations.
• Initially, Egypt and Israel seemed to have conflicting interests regarding the Sinai Peninsula.
• Deeper investigation revealed shared interests such as security and sovereignty.
• Trading off less important issues (like land control) for more important issues (like security) allowed for agreement.

Tools of Value Creation

• Building trust
• Sharing information about each party's needs helps create an open negotiation.
• This open communication allows both sides to maximize joint benefit.

Gender Roles and Negotiation Outcomes

• Previous studies showed inconsistent results in whether men or women are more successful negotiators.
• Some studies suggest gender differences in negotiation outcomes, but this effect can be improved by adjusting the conditions.
• Women may be less inclined to initiate a negotiation on their behalf, but women who advocate for others are more assertive in negotiation.
• Ambiguity in negotiations favours women in certain situations.

BATNA in Negotiation

• A negotiator's BATNA is the best alternative to a negotiated agreement.
• The attractiveness of each party's BATNA determines whether any agreement will be possible.
• A reservation price/value is the least attractive set of terms in a negotiation (better than the BATNA).
• Mistakes arise from confusing the BATNA with best outside option, while not considering interdependence.
• Treating BATNA as last resort reduces creativity and willingness to explore multiple alternatives.
• Negotiators can better understand how to react to 'No' by understanding the different types of rejection.