Task 7 - Quid Pro Quo Negotiation Analysis PDF

Task 7 - Quid pro quo (the art of the deal) Making Rational Decisions in Negotiations - Bazerman chapter A decision-analytic approach to negotiations Game theory - an economic framework that develops mathematical models to analyze the outcomes that will emerge in multiparty...

Task 7 - Quid pro quo (the art of the deal) Making Rational Decisions in Negotiations - Bazerman chapter A decision-analytic approach to negotiations Game theory - an economic framework that develops mathematical models to analyze the outcomes that will emerge in multiparty decision-making contexts if all parties act rationally. Game theory provides the most precise advice to negotiators, but it assumes that the people who negotiate are rational all the time, which contrasts how people behave in real life. Decision-analytic approach to negotiations - an approach which focuses on how people behave in real life, rather than if they were absolutely rational. It provides advice for a focal negotiator and it based on 3 key sets of information: Each party's alternative to a negotiated agreement. Each party's set of interests. The relative importance of each party's interests. Alternatives to a negotiated agreement Before beginning a negotiation, we should consider what to do if we fail to reach an agreement - Best Alternative To a Negotiated Agreement (BATNA). We should prefer any negotiated agreement that provides us more value than our BATNA over an impasse. Also, we should decline any negotiated agreement that provides less than our BATNA. Negotiator's reservation/indifference point - the point at which the negotiator is indifferent between a negotiated agreement and an impasse. When the other side has made their final offer, the rational decision is to consider the BATNA. If this is not done, emotionscan dominate the situation and we can make a suboptimal decision (say "no" to offers better than our BATNA or "yes" to offers worse than our BATNA). The interests of the parties To analyze a negotiation it is important to understand all of the parties' underlying interests (not only their stated positions about their interests, which are the overtly stated demands). Sometimes a focus on deeper interests can suggest creative solutions that help each side get more of what they want. It is also crucial to know how important each issue is to you, and how important each issue is to the other parties in the negotiation process. The best agreements are reached by trading off relatively unimportant issues for more important ones. Summary When taking in account the 3 key sets of information prescribed by the decision-analytic model, one is prepared for the 2 primary tasks of negotiation: creating and claiming value. Creating and claiming value are processes that occur simultaneously in a negotiation. Claiming value in negotiation One of the key skills of negotiation is to determine the other party's reservation point and to aim for a resolution that is barely acceptable to the other party. However, this is quite difficult, because if one party misjudges the situation and demand a bargain that is beyond the other party's reservation point, an impasse will occur. Example: a new MBA is being recruited for a highly specialized position. The organization and the employee have agreed on all issues except salary. The organization has offered $90,000, and the employee has counteroffered $100,000. Both sides believe they have made fair offers, but they both would very much like to reach an agreement. The student, while not verbalizing this information, would be willing to take any offer over $93,000 rather than lose the offer. The organization, while not verbalizing this information, would be willing to pay up to $97,000 rather than lose the candidate. In this case, there is a positive bargaining zone between $93000 and $97000, in which both parties would agree on a value. When the reservation points for the 2 parties do not overlap, a negative bargaining zone exists. Creating value in negotiation One-issue negotiations (e.g. including only salary, like the above one) involve the claiming of value, but not the creating of value. Most important negotiations are often more complex, involving many disputed issues. Through the process of identifying and adding issues, the parties will have the potential to create value, thereby increasing the amount of total benefit available. Complex Cognition Page 1 Value creation: the case of the 1978 Camp David Accords Camp David 1975 talks: Egypt and Israel tried to negotiate the control of the Sinai Peninsula, a situation in which it appeared that the two sides had directly opposing goals. Egypt wanted the return of the Sinai in its entirety, while Israel, which had occupied the territory since the 1967 war, refused to return this land. Efforts at compromise failed. Neither side found the proposal of splitting the Sinai acceptable. From that description it looks like a negative bargaining zone exists and an impasse is inevitable: However, later developments showed the existence of multiple issues, which allowed for creating value in the negotiation process: As the Camp David negotiations continued, it became clear that while the positions of Egypt and Israel were incompatible, the interests of the two countries were compatible. Israel’s underlying interest was security from land or air attack. Egypt was primarily interested in sovereignty over land that was part of Egypt for thousands of years. What emerged was the existence of two real issues, instead of one, with differential importance to the two parties: sovereignty and military protection. The solution that emerged traded off these issues. The agreement called for Israel to return the Sinai in exchange for assurances of a demilitarized zone and new Israeli air bases. This way the 2 parties realized the existence of a positive bargaining zone by considering each other’s interests, not just their stated positions. With these interests in hand, it was possible to develop an agreement by trading off the issue that each country cared less about for the issue that each country cared more about. Trading on issues to create value Whenever one party weighs the issues differently than the other party, there is the opportunity to find tradeoffs across issues that make both parties better off than they would have been by simply compromising on both issues. Creating value is not just what a ‘‘nice’’ negotiator does when she cares about the other side - it’s what a rational negotiator does to increase the size of the pie that the parties have to divide. A well-informed negotiator should see differences between parties as an opportunity to create value by trading issues that parties care more or less about. Creating value through bets Value can also be created with contingent contracts (bets), when parties disagree about uncertain future outcomes. For example, a client who doubts her lawyer's ability to win in court may sign a contingent contract with the lawyer that depends on his performance: if the case is won, the lawyer is guaranteed a large payment; otherwise - the lawyer gets no payment. Another example: if a book publisher is skeptical about an author's ability, it should be willing to pay the author a higher percentage of sales revenue in exchange for very little money upfront. If the author is confident of her book’s success, she will agree. Contingent contracts can improve the outcomes of negotiations in several ways: By creating value when they build on differences - if parties agree to disagree about future outcomes, they can design a contingent contract based on their differing predictions. By eliminating the obstacle of biases - biases such as the endowment effect and overconfidence can be negated by using contingent contracts, which allow parties to bet on their own (biased) beliefs. By establishing if a party is insincere - bluffs and false claims can be easily countered with contingent contracts - if a party is bluffing, they would not be willing to sign such a contract. By establishing motivation for performance - contingent contracts also increase parties' incentives to perform at contractually specified levels. Summary Getting a good deal in negotiation is not just about claiming as much value as possible but also about creating value. It is better to get 55% of 2000$ rather than 60% of $1000. The tools of value creation Build trust and share information The easiest way for parties to create value is for the two opponents to share information with each other about the values that they place on different issues. Once this information comes to light, the parties can maximize joint benefit. However, we often are reluctant to trust the other side in a negotiation because we believe that giving away information could prevent us from claiming value. Complex Cognition Page 2 claiming value. Rational negotiators maintain and strengthen relationships with others even when there is no obvious economic or political reason to do so. This relationship building can increase the likelihood that your next negotiation will be with someone who happens to trust y ou. Ask questions By asking questions, you increase the likelihood of learning critical information that will allow you to find a good settlement. Sometimes the other side will not answer the questions because that would prevent them from claiming value (or it is confidential). However, oftentimes asking questions can help understand the other party's interests. Strategically disclose information Behaviors in negotiations are often reciprocated. Therefore, it is a good strategy to disclose information of minor importance, so that the other side is also tempted to disclose more information. Negotiate multiple issues simultaneously Focusing on one issue at a time may not lead to favorable outcomes: if you have pushed hard and got what you wanted on one issue, you might leave the other side so little benefit that they become inflexible on all of the other issues and the entire deal falls apart. By contrast, when people negotiate issues simultaneously, they can find favorable, value-creating trades across issues. The relative importance of each issue to each party only becomes apparent when the issues are discussed simultaneously. Make multiple offers simultaneously Instead of making 1 offer, a better approach is to make multiple package offers of equal value to you. This signals that you are willing to be accommodating and that you are interested in understanding the other party’s preferences and needs. Search for post-settlement settlements After an agreement is reached, there is often opportunity to improve areas of the contract that may not be completely optimalfor either party. The signed agreement confirms the parties’ trust in each other and their ability to work together productively. However, it may be beneficial to propose to the other side a post-settlement statement (PSS) process whereby both parties agree to be bound by the initial agreement if no better agreement is found. If a better agreement is found, however, the two parties will share the surplus. The PSS process involves a third party to examine the contract and propose a superior agreement. A Meta-Analysis on Gender Differences in Negotiation Outcomes and Their Moderators - Introduction & Discussion Summary Evidence on the relative effectiveness of men and women in negotiations has been mixed. Recent studies suggest that gender differences favoring men can be eliminated or reversed under certain conditions. Gender roles and economic negotiation outcomes Negotiation - communication between at least 2 parties aimed at reaching agreements on their (perceived) divergent interests. Women compared with men display a lower tendency to initiate negotiations, and negotiate less competitively. They also tend to achieve worse economic outcomes, but the effect is quite small. Role congruity theory - suggests that gender differences in negotiation behavior and outcomes - at least in Western cultures - can be explained by the fact that the agentic behaviors usually considered essential for negotiating economic outcomes are not congruent with the female gender role. This incongruity may lead to women displaying fewer negotiation behaviors that increase economic outcomes and also their negotiating counterparts to view these negotiation behaviors as less appropriate. Therefore, situations that make negotiating and the female gender role more congruent should reduce or reverse gender differences in negotiation. Social role theory - gender roles are composed of consensual beliefs about behavioral expectations related to men’s and women’s roles. The female role has communal characteristics such as being accommodating, concerned with the welfare of others, or relationship-oriented. The male gender role has agentic characteristics such as behaving in competitive, assertive, or profit-oriented ways. Gender roles are not only descriptive, but they also include expectations about how men & women ought to behave. Women who deviate from the female role (e.g. by acting assertively) risk meeting social backlash. Women violating gender expectations, such as negotiating assertively, are evaluated more negatively (e.g., less likeable) than men displaying similar behavior. Women tend to be concerned about backlash and tend to adjust their behavior accordingly. Negotiating effectively for economic outcomes usually requires agentic qualities such as behaving assertively or competitively, and is thus more congruent with the male gender role. In contrast, ineffective negotiating with respect to economic outcomes is linked to stereotypic female qualities such as behaving submissively or accommodatingly. Moderation of gender differences in economic outcomes Research on gender differences in negotiation has been inconsistent, which is why it has been proposed that gender differences in negotiation are Complex Cognition Page 3 Research on gender differences in negotiation has been inconsistent, which is why it has been proposed that gender differences in negotiation are moderated by the negotiation context. The relative congruity between a negotiation and the female gender role is considered as a general moderating principle. The broader negotiation situation, the negotiators and the negotiation task may affect role congruity for women in negotiation. Advocacy - a situation-based moderator that concerns whether negotiators are negotiating for themselves or on behalf of others. Self-advocating women who negotiate assertively risk incurring backlash because assertiveness might be perceived as incongruent with the female gender role. When women negotiate on behalf of others, however, the same assertive behavior can be interpreted as being concerned with the welfare of others, and, thus, as congruent with women’s communal gender role. Research has shown that women advocating for another individual anticipate less backlash, and, therefore, negotiate more assertively as compared to self-advocating women. Structural ambiguity of situations - another situation-based moderator that refers to how ambiguous (weak) or unambiguous (strong) the negotiating situation is. Ambiguous situations do not provide people with a clear protocol or script of appropriate behavior. In these situations, people rely on more general behavioral schemata and social norms available, such as preconceived gender roles and stereotypes. Conversely, in unambiguous situations people have the same understanding of appropriate behavior and construe the situation similarly. The influence of more general social norms such as gender roles and stereotypes is reduced. Gender differences in economic outcomes favoring men are expected to be reduced when negotiators are provided with information about the economic structure of the negotiating situation (i.e. the bargaining range). This reduces structural ambiguity and therefore reduces the reliance on gender roles. Gaining negotiation experience (a person-based moderator) should enable people to develop a protocol or script of appropriate and conducive behavior, thereby reducing the ambiguity in negotiations. As a result, gaining negotiation experience might minimize women’s reliance on the female gender role. Self-initiated negotiation - another person-based moderator that refers to individuals' motivation to participate in a negotiation. Women are often reluctant to negotiate because initiating negotiations is perceived as stereotypically male behavior. Thus, women behaving consistent with their gender role might not actively seek opportunities to negotiate and only respond to negotiation challenges when necessary. However, if the gender role pressure is not as salient (e.g., when people do not endorse traditional gender roles or when it is normative to behave assertively) women may self-initiate negotiations. In these cases, women might display more effective negotiation behavior during negotiations than women who may be more influenced by the female gender role. The gender difference in economic outcomes favoring men should thus be reduced when participation in a negotiation is self-initiated rather than compulsory. Distributive negotiations - negotiations in which typically only 1 issue is negotiated and therefore an increase in profit for one party means an equivalent decrease of the counterpart's profit. In these settings, assertive behaviors such as making aggressive first offers or refusing to yield (which are regarded as masculine) maximize economic outcomes. Women may thus perceive a pronounced incongruity between negotiation behaviors that increase economic outcomes and gender role behaviors, and, therefore, might be especially disadvantaged in this type of negotiations. Integrative negotiations - negotiations which provide opportunities for joint grants because several issues are negotiated that are valued differently by the involved parties. Maximizing economic outcomes in integrative negotiations requires behaviors such as asking questions about the interests or priorities of the counterpart (which can be seen as more congruent with female roles). On the one hand, women may thus be less disadvantaged by role incongruity in integrative negotiations so that the gender difference favoring men might be reduced in integrative as compared to distributive negotiations. However, dual concern theory suggests that achieving highly integrative outcomes requires both a high concern for the counterpart as well as for oneself. ○ A high concern for oneself is incongruent with communal aspects of the female role, and when combined with low resistance to yielding, negotiators engage in premature giving in, which limits the discovery of integrative solutions. ○ Consistent with increased yielding by women, research has found that women obtain worse outcomes in integrative negotiations than men. ○ The cooperative behaviors of women (i.e., concessions) hence can result in low economic outcomes in both distributive and int egrative negotiations. Discussion The meta-analysis found that consistent with role theories, aspects of negotiating are sometimes incongruent with the female gender role. Gender differences in negotiation depend both on the situations as well as on the involved people, and are thus variable. Gender differences in context The results revealed a bargaining advantage for men under conditions of highest predicted role incongruity for women (when negotiators are not experienced, in negotiations with high structural ambiguity, etc.), but a bargaining advantage for women under conditions of lowest predicted role incongruity (when they possess negotiation experience, are negotiating for an individual, etc.) Therefore, gender differences favoring men can be reduced and also reversed. Advocacy emerged as a significant moderator: the gender difference in economic outcomes favoring men was significantly weakened when negotiators acted on behalf of another individual instead of for themselves. However, this was not the case when negotiators acted on behalf of a larger entity (e.g. organization), but only when acting for another Complex Cognition Page 4  However, this was not the case when negotiators acted on behalf of a larger entity (e.g. organization), but only when acting for another individual. When negotiators represent a large entity such as an organization, it can be unclear for whom they are essentially negotiating. The gender difference favoring men was significantly reduced when negotiators were provided with information about the bargaining range (i.e. when structural ambiguity was reduced). The gender difference in economic outcomes favoring men was significantly reduced when negotiators had negotiation experience. Therefore, these gender differences are dynamic - they diminish with experience. The results did not show a statistically significant impact related to gender in economic outcomes when participation was self-initiated. Moderation by the integrative potential of negotiations was also not found. BATNAs in Negotiation: Common Errors and Three Kinds of "No" - Article Summary This one is partly summarized by AI. The BATNA provides a minimum criterion for evaluating a possible deal, for example walking away, making something instead of negotiating to buy it, selling to a different customer, forging an alternative alliance, taking a strike etc. Therefore, one's BATNA is not a number, but instead the course of action that one would take rather than ultimately accept a proposed deal. The attractiveness of each party's BATNA determines whether zone of possible agreement (ZOPA) exists, and if it does, where it is located. Reservation price/value - the least attractive set of terms in the current negotiation that is still better for you than choosing your BATNA. Common Errors Nitpicky Semantic Problem Number One: Implying That One’s BATNA Cannot Be a Negotiated Agreement The definition of BATNA as "the results you can obtain without negotiating" is not entirely correct, because one's BATNA can also be a better, alternative agreement with another party. More Serious Problem Number Two: Characterizing Your BATNA as Your Best Outside Option, Independent of the Other Side Many descriptions of BATNA as the "best outside option, independent of the other side" are needlessly limiting and do not accurately reflect the interdependence of BATNAs in many bargaining relationships. Such descriptions assume that the other side has no influence on your BATNA, which is often not the case. In many negotiations, the other side's actions and choices can significantly impact your BATNA. Also, BATNAs are often inherently interdependent. In other words, your BATNA may depend on what the other side does or what other parties are willing to offer (e.g. in a marriage where one wants to stay in the marriage but both people want different things). This means that your BATNA cannot be accurately characterized as an "outside option" that is independent of the other side (e.g. a divorce is not a good solution). Negotiators should properly understand their BATNA as the best alternative "with respect to the negotiation at hand" and not with respect to any negotiated agreement elsewhere. Even More Serious Problem Number Three: Treating Your BATNA Mainly as a Last Resort Conceptualizing one’s BATNA mainly as a kind of last resort can be unnecessarily limiting and prevent one from achieving better outcomes. The problem with treating your BATNA mainly as a last resort is that it can limit your creativity and willingness to explore alternative solutions. If you view your BATNA as the only alternative to a negotiated agreement, you may be less likely to consider other options that could potentially lead to a better outcome for both parties. To address this issue, negotiators should view their BATNA as one of several alternatives available to them in the negotiation. Rather than treating it as a last resort, negotiators should consider their BATNA as a benchmark for evaluating the quality of any proposed agreement By viewing their BATNA in this way, negotiators can be more creative and flexible in exploring alternative solutions. They can also avoid the trap of settling for an agreement that is worse than their BATNA simply because they view it as a last resort. Additional Misconceptions One common misconception is the idea that some negotiators have no BATNA. This is a misunderstanding of the BATNA concept, as everyone has a BATNA by definition. It does not have to be a good option, but it exists. Another misconception is the idea that your BATNA is fixed and unchangeable. This is a mistake, as your BATNA can be influenced by a variety of factors, including your own actions, the actions of the other party, and changes in the broader market or industry. Three Kinds of "No" Negotiators should be aware of the different ways in which parties can say "no" and the implications of each type of response. "No" of disagreement - occurs when one party disagrees with a proposal or offer. This type of "no" can be a starting point for further negotiation and exploration of alternative solutions. Complex Cognition Page 5  and exploration of alternative solutions. "No" of delay - occurs when a party is not ready or willing to make a decision at the current time. This type of "no" can be a way for the party to gather more information or to delay the negotiation until a more favorable time. "No" of rejection - occurs when a party outright rejects a proposal or offer. This type of "no" can be a final decision or a signal that the party is not willing to negotiate further. Understanding the different types of "no" is important for negotiators because it can help them to respond more effectively to each type of response. Complex Cognition Page 6