Negotiation Notes PDF

Chap 1) Negotiation: the tangibles-> the prices or terms of agreement, intangibles->underlying psychological motivations that may directly or indirectly influence parties during negotiations negotiations can be characterized as -> -​ independent - able to meet their own needs with out anyone...

Chap 1) Negotiation: the tangibles-> the prices or terms of agreement, intangibles->underlying psychological motivations that may directly or indirectly influence parties during negotiations negotiations can be characterized as -> -​ independent - able to meet their own needs with out anyone -​ Dependent- must rely on others for what they need -​ Interdependent- are characterized by interlocking goals AFTERMATH OF NEGOTIATION can be: Disruptive: zero-sum- one gains at the others expense Interactive: not zero-sum Best alternative to a negotiated agreement(BATNA)/outside option - what you get if you walk away from the negotiation and never return Concessions- what you give up, relative to your most preferred outcome, in exchange for an agreement. -> concessions dilemmas= 1) dilemma of honesty; how much truth to tell the other party 2) dilemma of trust- how much of what the other party tells you that you should believe -> trust others, but when they lie you should only consider verifiable info- use the smell test and ask for receipts NOTE: being dishonest can be expensive, and require a lot more memory+bandwidth BEING honest is cheap, but you need to implement GRIM TRIGGER STRATEGY = 1) I cooperate with you as long as you cooperate with me 2) if you stop cooperating I impose the imaginable credible punishment NOTE: Rich countries are rich because they have high trust Opportunities for DISRUPTIVE BARGAINING arise in situation of anonymity: they can be well defined 1)​ Buyer and seller of single object 2)​ Real estate or car NOTE: the agreement would be price or transfer of property PROBLEM with disruptive bargaining 1)​ Threat point 2)​ Target point 3)​ Cost of walking away Conflict-sharp disagreement or opposition of interest. Strategies in the dual concerns model for conflict GAME THEORY- a game is solved when one can describe the equilibria; the outcome we can expect from the players NASH equilibrium: set of strategies such that; neither player has an incentive to change their strategy given the strategy of the other player OR is a set of strategies such that each player plays a best response to the other pliers strategy DEFECT: dominant strategy for each player CHAP 2) TARGET POINT: each negotiators most preferred agreement Resistance point: each negotiator least prefferet agreement BArgaining zone: interval between resistance points between each person ZERO SUM=disruptive bargaining Positive-sum = intergrative TACTICS for disruptive sistuations: 1)​ Assessing the other partys target, resistance and cost of walking away 2)​ Managing the other partys impressions 3)​ Modifying the other partys perceptions 4)​ Manipulate the actual costs of delay or termination- disruptive action, alliance with outsiders, schedule manipulation PROCESS OF COMMUNICATIONS Positions- 1)​ opening offers Anchoring- under uncertainty initial offers have big impact on decisions NOTE: pay more attention to wether you are benign anchored than to trying to anchor the other party 2)​ Opening stance- signal willingness to compromise or fight 3)​ Initial concessions- conced or not 4)​ Pattern of concessions- expectations matter 5)​ Final offer- communication matters PEOPLE ARE- Bayesian- they update their beliefs based on new info Relative Bargaining Power:​ This refers to how much influence or control one party has compared to another in a negotiation or agreement. If one side has more resources, options, or leverage, they have higher bargaining power and can often get a better deal. Nash Bargaining Insights:​ Based on game theory, Nash Bargaining suggests that in a negotiation, the best outcome is one where both parties agree on a solution that maximizes the product of their gains. It emphasizes fairness and mutual benefit, assuming both sides act rationally. Pareto Principle:​ Also known as the 80/20 rule, this principle states that in many situations, roughly 80% of the effects come from 20% of the causes. For example, 80% of a company's profits might come from 20% of its customers. It highlights focusing on the most impactful factors. ->Pareto efficient contains a point where there is no agreement that would make any party better off without decreasing the outcomes to any other party. NASH bargaining Limitations 1)​ Abstract- reduction of a problem into closed and compact divisible space  2)​ Silent on how one arrives at the solution (no communications) 3)​ Player intelligence and rationality are extreme requirements Closing a deal: 1)​ Provide alternatives (menu) 2)​ Assume the close (paperwork) 3)​ Split the difference 4)​ Exploding offers (clock) 5)​ Sweeteners (give a free pen) HARDBALL tactics 1)​ Good cop/bad cop- team roll play 2)​ lowball /hardball- exaggeration- this sets unrealistic expectations and makes the other party ajust 3)​ Bogey-misdirection- pretending that a particular issue is very important to when its not. 4)​ Nibble- ask for a sweetener- asking for a small concession after the main deal has been agreed upon. 5)​ Intimidation/agro/ 6)​ snow job- overwhelming other party with excessive info, details or complexity to conduse them. RESPONDING TO hardball tactics 1)​ Ignore them- deflate the bravado 2)​ Discuss them- name and shame 3)​ Respond in kind- if you can play hardball 4)​ Co-opt the other party- how to win friends and influence people SELECTIVE NEGOTIATION:This refers to choosing which battles to fight during a negotiation. Instead of addressing every issue, you focus on the most important ones to maximize your gains or maintain a good relationship. Example: When buying a car, you might focus on negotiating the price rather than arguing over minor add-ons like floor mats. This saves time and energy for the most critical issue. ANCORING EFFECT: This is a cognitive bias where the first offer or number presented in a negotiation sets a mental benchmark (or "anchor") that influences the rest of the discussion. Positive Bargaining Zone: This occurs when there is an overlap between the minimum a seller is willing to accept and the maximum a buyer is willing to pay. A deal is possible here. ○​ Example: A seller wants at least ○​ 15,000foracar,andabuyeriswillingtopayupto  ○​ 15,000foracar,andabuyeriswillingtopayupto17,000. The bargaining zone is between ○​ 15,000and ○​ 15,000and17,000. Negative Bargaining Zone: This happens when there is no overlap, meaning no deal is possible. ○​ Example: The seller wants at least ○​ 20,000,butthebuyerisonlywillingtopayupto ○​ 20,000,butthebuyerisonlywillingtopayupto18,000. There’s no common ground for agreement. Precision PriceThis refers to using very specific numbers (e.g., 19,875 instead of 19,875 instead of 20,000) to make an offer appear more calculated, credible, or justified. It can also signal that you’ve done your research. Indirect assessment: This is a strategy where you gather information indirectly rather than asking direct questions. It helps you understand the other party’s priorities, limits, or motivations without revealing your own.t. CHAP 3- Mutual Benefical trade- Almost always gains from trade- or no need to negotiate because trade in voluntary and there is always more surplus create than both parties realize. cutting costs for compliance- process of reducing expenses associated with meeting the terms, agreed upon during a negotiation. INTEGRATIVE NEGOTIATION 1)​ Free flow of info 2)​ Understand other negotiators needs and objectives 3)​ Stree common grounds and minimize difference 4)​ Creative search for solution that meet both parties needs Factors for determining the use of integrative negotiations 1)​ Negotiation that includes more than one issue 2)​ It is possible to add more issues to the mix 3)​ Parties have varying preferednce across the issues 4)​ Renegotiation will likely happen NOTE:Claiming value in integrative negotiation involves negotiators carving out their share of resources, also known as distributive negotiation. VALUE CLAIMING->disruptive negotiating This is about claiming as much value as possible for yourself in a negotiation. It’s often seen as a "win-lose" approach, where one party's gain is the other party's loss. VALUE CREATING-> integrative negotiations: This is about expanding the pie by finding ways to create additional value for both parties. It’s a "win-win" approach, where collaboration leads to better outcomes for everyone. Negotiators dilemma-> the tension between behavious that are competitive and behaviors that are cooperative. “No matter how much creative problem solving enlarges the pie, it must be divided; value that has been created must be claimed” What creates value should preced those that claim value 1)​ Teamwork is more efficient when focused on collab that who should get what 2)​ Claiming requires disruptive processes that neeed to be introduced carefully into integrative bargaining otherwise they harm the relationship and derail process Interest: underlying concerns, needs, desires or fears that motivate a negotiator to take a particular position Positions include: 1)​ Substantive intress-focal issues (econ or financial) 2)​ Process interest- the way a dispute is settled (people care about winning or being beat) 3)​ Relationship intress- in the moment or future reputation 4)​ Principle intress- fairness or ethical and moral consideration Obervations on INTEREST: 1)​ Almost always more than one issue of importance 2)​ Interest changes 3)​ Surface interest by asking yourself and others questions 5 methods to generate alternative scenarios 1)​ Expand the pie- look for ways nto expand amount of resources for both partys 2)​ Logroll (trade interest)- trading concessions on issues that are more important to one party than the other. (each side gives up something they value less for something they value more) -​ Different ways to logroll= difference in risk, time preference and expectation/belief 3)​ Non specific compensation- one party gets what they want, the other is compensated in a way that dosent directly relate to the issue in hand. 4)​ Cut the cost for compliance-easier for other party to agree by reducing the costs they would incur by saying yes E.G landlord offers to cover cost of repair if tenant signs a longer lease  5)​ Find a bridge solution (genuine innovation)- create completely new solution that satisfies both parties (digging deeper) HOW TO EVALUTE ALTERNATIVES 1)​ Reduce the set 2)​ quality , standards and acceptability 3)​ Agree to criteria in advance 4)​ Justify personal preferences 5)​ Consider the influence of intangibles 6)​ Use subgroup/committee 7)​ Take time out/cool off 8)​ Exploit different ways to logroll 9)​ Keep decisions conditional on final agreement 10)​Minimize formality Strategies: 1)​ Common goals 2)​ Cooperatemotivate working together 3)​ Focus on clear communications Ultimatum game:key rule: if offer is rejected, both players get nothing RATIONAL: players should accept any offer because something is better than nothing, in real life people reject unfair offers because they value fairness. War of attrition:players compete by outlasting each other to win a prize. The longer the game goes on, the more costly it becomes for both players. (staring contest) “who wil blink first? the longer you wait, the more it hurts” CHAP 4 - PLanning DEFINING ISSUE: 1)analysis of all possible issues to be decided 2)Previous experience in similar negotiations 3) research 4)consultation with experts DEFINING INTEREST- -​ Substantive- tangible materials or financial interest -​ Process - how the negotiation is conducted and fairness/effeiciency itself -​ Relationship- personal/professional; maintaining trust, respect and collaboration -​ Principle interest- ethical, morals or ideological values DEFINING LIMITS AND ALTERNATIVE -​ Resistance points  -​ Alternatives (outside options) Settling targets and Openings -​ Target point: where we want to end up - range -> pessimistic-realistic-optimistic - specify criteria/ reason for packaging issues and objectives -understand tradeoffs and throw away ASKING PRICE= best we could hope for ECONOGRAPHICS- the goal is to understand some of the fundamental difference in people 1)​ Fairness 2)​ Patience 3)​ Risk preferences 6 components of Econograhphics 1)​ Generosity (fariness and cooperation) 2)​ Punishment (enforces norms and deters unfair behaviours) 3)​ Inequality aversion- discomfort individuals feel when outcomes are perceived as unfair.(fariness and cooperation) 4)​ WTP (value) 5)​ WTA(williness to accept)(value) 6)​ Uncertainty(risk) 7)​ overconfidence(risk) ASSESSING constituency and social context of negotiation 1)​ FIELD ANALYSIS  -​ Who is on my team? -​ Who is on other team? -​ Who is on the sidelines -​ Who is in the stands? -​ Who else matters in the broader context 2)​ Analyzing other party -​ Resources, issues, bargaining mix -​ Interest, resistance point, alternatives -​ targets , objectives, reputation, style, constituents -​ Authority to make an agreement -​ Likely strategy and tactics 3)​ Planing issue presentation and defence -​ Facts to support psoition -​ Support (experts/assistance) -​ Comparisons with similar negotiations -​ Assessment of the other party likely position -​ Sequencing of communication 4)​ Protocol- who, what, when, where, how -​ Note taker -​ Do not rely on other partys notes -​ How someone to de-bried with if possible -​ Keep a journal MOVING from plan to action- overall plan to accomplish goals in a negotiation and the action sequences that will lead there -​ Pattern or plan that integrates an organizations major targets, policies and action sequences into cohesive whole TACTICS 1)​ Short term, adaptive moves designed to enact or pursue broad strat, whic creates stability, continuity and direction for tactical behaviour 2)​ DUAL CONCERNS MODEL(unliteral or bilateral) -​ i)Concern for self -​ ii) concern for others (how much you care about others outcomes) High concern self/others- focused on achieving your goals or goals of others This model helps to prioritize dimensions of desired settlements -​ AVOIDANCE: non-engamenet -​ Engagement: competition, collaboration or accommodation The Dual Concerns Model describes negotiation strategies based on:  ​ Concern for own outcome: Competition or Accommodation. ​ Concern for other's outcome: Collaboration or Avoidance. Barganing mix- combination of issues, terms and condition. Linkage- connecting or tying together issues Focal issues- issues are the key points or central topics that are the most important. “Primary concern” CHAP 5 4 approaches to ETHICAL reasoning 1)​ End result ethics- rightness of an action is determined by considering consequences, action are more right if they promote more happiness. 2)​ Duty ethics- rightness of an action is determined by considering obligations to apply universal standards and principles. 3)​ Social contract ethics- rightness of an action is determined by the customs and norms of a community. Laws are important, but morality determines the ultimate standard. 4)​ Personalistic ethics- rightness of an action is determined by ones conscience. Locus of truth is found in human existence. Ones should follow ones group but also stick up for what they believe. IN NEGOTIATING TERMS 1)​ End result ethics- you might do whatever is necessary to get the possible outcome  2)​ Duty ethics- you might perceive an obligation never to engage in subterfuge and might reject a tactic that is a lie 3)​ Social contract- base your tactical choices on appropriate conduct for behaviours in your community; if someone does this you might aswell do the same. 4)​ Personalistic ethics- you consult your conscience and decided wether acting dishonestly matches how you see yourself as a moral actor. Interpersona trust- a generalized expectancy held by an individual that the word, promise, orla or written statement of another individual or group can be relied on. RECALL- high trust begets high trust Self monitoring- the extent to which people are responsive to social cues that come from the social environment Machiavelliasnism- tendency to be cynical abou others motives, more likely to behave unaltruistically towards others, and less willing to change their convictions under social pressure. -> distrust: amoral manipulation; desire for control; desire for status Face threat sensitivity: the degree to which people are more or less sensitive to losing or saving face The “BIG 5” personality factors 1)​ Extroversion- being sociable, assertive, talkative 2)​ Agreeableness- being flexible, co-operative, trusting 3)​ Conscientiousness- being responsible, organized, achievement oriented 4)​ Emotional stability- being secure, confident not anxious 5)​ Openness- being imaginative, broad-minded, curious CAtegories of MArginally ethical negotiating tactics 1)​ Traditional competitive bargaining- not disclosing your walkaway, making an inflated opening offer 2)​ Emotional manipulation- faking anger, fear, disappointment; faking elation, satisfaction 3)​ Misrepresentation- distorting info or negotiation events in describing them to others 4)​ Inappropriate info gathering- bribery, infiltration, spying 5)​ Bluffing- insencer threats or promises NOTE; “what they want”= common value Omission- failing to disclose info that would benefit the other Commission- actually lying about the common value issue Cognitive ability- general mental capability that, among others things, involves the ability to reason, plan, solve problems, think abstractly, comprehend complex ideas, learn quickly and learn from experience Incremental theorist- people who believe negotiation ability tends to be malleable rather than fixed TEAM production and relationship specific investments -​ Agreements are typically the beginning of a relationship -​ So our game theoretic intuition suggest we should consider actions that take place post agreement -​ POST-AGREEMENT actions are what determine payoffs NOTE: no agreement is final until payoffs are realized Moral hazard- one party to a contract may have incentive to take actions that differ from what the other party desires -​ Actions are non-contractible Maintaining status quo- admonish the other to be truthful in order to maintain their good name “what people think”. Projection- tendency of individual to attribute their own thoughts, feeling or motivations to the other party in a negotiation “Assume the other party thinks or feels the same way they do” Frame - perspective or lens through which a party views the negotiation.