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Dynamic nature of business
people must renegotiate their existence in organizations throughout their careers
Myth 1 – negotiations are fixed sum
whatever is good for 1 pty must be bad for other pty.
Walton and Mckersie’s conceptualization
negotiation mixed motive enterprise, parties have incentives to cooperate as well as compete
Myth 2 – You need to be either tough or soft… rather than…
Myth 3 – good negotiators are born
most excellent negotiators are self made.
Myth 4 – life exp is a great teacher
experience in absence of feedback largely ineffective in improving negotiation skills. Memories tend to be selective. Experience improves confidence but not always accuracy
Myth 5 – Good negotiators take risks
tough negotiators are rarely effective.
implies people need to know how to integrate their interests and work across business units and functional areas
interpersonal decision making process necessary whenever we can’t achieve our objectives singlehandedly
Economic forces
negotiators need to know how to operate in uncertain and ambiguous environments
presents challenges in terms of diff norms of comm
Leaving money on table
lose-lose- occurs when negotiators fail to recognize and capitalize on win win potential
Settling for too little
winners curse- when negotiators make too large concessions resulting in too small share of bargaining pie
Walking away from table
when reject terms offered by other pty that are demonstrably better than any other option available
– Settling for terms worse than BATNA
agreement bias- when feel obligated to reach agreement even when settlement terms not as good as other alts
tendency for people to view exps in way that is flattering or fulfilling for them
Confirmation bias
tendency of people to see what they want to see when appraising own performance. Leads to selectively seek info that confirms what they believe is true
opposite of optimizing- settle for something less than they could otherwise have
Self reinforcing incompetence
people must have insight into their limitations. “blissfully unaware of own incompetence”
opposite of satisficing – set high aspirations and attempt to achieve as much as possible.
anticipate the reactions of your opponents
dependent of the reactions ans actions of their opponent
usually adopt one of 3 mindsets – 1. soft bargaining (capitulate to the other side. 2. prepare for attack (hard bargaining). 3. compromise to reach a midpoint (false win-win)
mixed-motive enterprise
involves both cooperation and competition
the thing or point that constitutes an ideal outcome
under-aspiring negotiator
sets target too low; can result in winner’s curse
winner’s curse
negotiator makes an offer that is immediately accepted by the other party
over-aspiring negotiator
aka positional negotiator; sets target too high and refuses to make concessions
grass-is-greener negotiator
does not know what he/she really wants; only that they want what the other party doesn’t want to give and doesn’t want what the other party is willing to offer. reactive devaluation
reactive devaluation
when you want what you aren’t being offered and don’t want what you are. grass is greener
best alternative to a negotiated agreement
reservation point
determined by what the batna represents
4 steps to determine a reservation point
1. brainstorm alternatives, 2. evaluate alternatives, 3. attempt to improve batna, 4. determine reservation price
focal points
salient numbers, figures, values that appear legit but have no basis in fact
sunk costs
money you have invested and you won’t get back
choose a sure thing over a gamble
reference point
determines what a person considers to be a gain or a loss
strategic risk
riskiness of the tactics negotiator uses at the bargaining table
contractual risk
risk associated with the willingness of the other party honoring its terms
reference points
lead buyers and sellers to have different valuations for objects
counter-factual thinking
thinking about what might have been but did not occur; important component in determining whether a person experiences regret; reference point for psychological evaluation of actual outcomes
sure thing principle
rational theory of decision making under certainty; it’s a sure thing something will occur regardless of other factors
overconfidence effect
unwarranted levels of confidence in people’s judgement of their abilities and likelihood of positive events and underestimating negative events
person or group w common interests acting in accord with their own preferences
hidden table
parties not present at the table
parties on same side in agreement with one another concerning their interests in the negotiation
one-shot negotiation
everything happens in one time w no future ramifications
long term negotiation
most negotiations – bc reputation information carries in social/professional networks
repetitive negotiations
evolution of relationship and maintaining trust must be considered; most important is employment negotiation; negotiators must renegotiate terms on regular basis
consensus conflict
beliefs differ btwn two parties/ppl and they seek to reach agreement
scarce resource competition
people vie for limited resources
claim made by one party and rejected by the other
linkage effect
some negotiators affect other negotiators; ie precedents in law cases
time horizon
the amount of time btwn the negotiations and the consequences or realization of negotiated agreement
negotiation dance
entire process of making an opening offer and reaching a mutually agreeable settlement
bargaining zone; zone of possible agreement; range btwn negotiators reservation points
parties fail to reach agreement; negotiators leave money on the table and are worse off by not reaching agreement
negative bargaining zone
no positive overlap btwn parties’ reservation points; negotiators should exercise BATNA
bargaining surplus
amount of overlap btwn reservation points
negotiator’s surplus
positive difference btwn the settlement outcome and the negotiator’s reservation point
anchor point
represented by your first offer bc you will never get more than that
chilling effect
asking for something outrageous. “chills the negotiation
named after lemuel boulware; former CEO of GE; avoid this; making first offer final offer
premature concessions
make more then one concession in a row before the other party responds or counteroffers
3 things to consider to formulate counteroffer and concession
1. pattern of concessions. 2. magnitude of concessions. 3. timing of concessions
unilateral concessions
concessions made by one party
bilateral concessions
concessions made by both sides
graduated reduction in tension model
GRIT – avoid escalating conflict to reach mutual settlement within bargaining zone; one party makes a concession and then the other party reciprocates by making a concession.
reductions a negotiator makes during negotiation
can be a problem bc values are arrived at arbitrarily
value placed on his/her public image; threatening results in competition not cooperation
equality rule
method of fair division; blind justice; outcomes distributed w/o regard to inputs
equity rule
method of fair division; proportionality of contributions principle; distribution proportional to contribution
needs-based rule
welfare-based allocation; divide proportionally according to need; method of fair division
upward comparison
compare to someone who is better off
downward comparison
compare to the less fortunate
comparison with similar others
for accurate appraisal of your ability
people compare themselves with others who can serve as models of success
desire to enhance or maintain a positive view
accurate self evaluation
truthful self knowledge
to alleviate tension from inequity
alter inputs; alter outcomes;
psychological justice
people denied the opportunity to restore equity they bring down others
distribution of resources; consistency, simplicity, effectiveness, and justifiability
integrative negotiations
all creative opportunities are leveraged and no resources are left on the table; win-win
pareto-optimal frontier
no other feasible agreement exists that would improve one’s party outcome while simultaneously not hurting the other party’s outcome
false conflict
illusory conflict; one party believes their interests are not compatible with the other party’s interests but they aren’t
lose-lose effect
failed to recognized overlap in compatible interests and reached an agreement that was suboptimal for both parties
premature concession
giving up ground before being asked to
fixed-pie perception
belief that the other party’s interests are completely opposed to your own
equal-concession negotiation
split difference; does not ensure win-win (misconception)
dual-concern model
high concern for the other party as well as high concern for one’s own interests; developed by Pruitt and Carvonale
illusion of transparency
negotiators believe they are revealing more than they actually are
making multiple offers of equivalent value simultaneously
present two proposals of equal value – you must make multiple offers they must be of equal value and they must be at the same time.
interferes w win-win; arguments for one’s own position or against the other’s position
inductive reasoning
negotiator can deduce where the other party’s interests and see the join gain
trading off to capitalize on different strengths of preference
optimistic; half full glass; more likely to logroll
half-empty; less likely to accept contingent contract
contingency contract
contract contingent on something occurring; should satisfy 4 criteria: 1. don’t create conflict of interest. 2. must be enforceable. 3. clear measurable and readily evaluated. 4. date or timeline mutually agreed upon
presettlement settlements
PreSS 3 characteristics: 1. formal – binding obligations 2. initial – intended to be replaced 3. partial – parties do not address or resolve all outstanding issues
postsettlement settlement strategy
agree to explore other options with goal of finding another more preferable option
resource assessment
identification of the bargaining issues and alternatives
issue mix
union of both party issues
old fashioned negotiator
hard tough stance for success
flower child negotiator
so busy expanding the pie they forget to claim resources. they never slice the pie
enlightened negotiator
expands and slices the pie
maximize own gain indifferent towards other’s gain
maximize the difference btwn results – wants to win and by the most possible
equality; minimize the difference between negotiated outcomes
rights procedure in which disputants present evidence and arguments tot he neutral third party with the power to hand down a binging decision
type of power based approach; one or more party makes threat
type of power based approach; parties take action to determine who will prevail
wise counselor
senior executives selected to consider disputes
multiple points of entry
negotiators have several points of access for resolving disputes
mandatory negotiations
can provide a way for reluctant negotiators to come to the table
skills and training
better prepared to negotiate in an interest based fashion
third party negotiation allows focus on interests
advisory arbitration
managers provided with info that would likely result from going to court
high level executives act as “lawyers” and represent different sides of the dispute. remove emotion while keeping the company’s interests in mind
crisis procedures
guidelines for emergency communications written in advance
intervention from third parties
can halt power contest
hybrid – if mediation fails the moderator can act as arbitrator
final offer arbitrator
must accept one of the final offers made – no compromise
final offer in sealed envelope – if no mutual agreement then the parties are stuck with unknown offer
intense, fleeting, result of an experience
chronic more diffuse – not directed at a particular person
genuine (emotion)
behavioral manifestation of felt emotion
strategic (emotion)
orchestrated to take counter-party off guard
emotional intelligence
understand emotions in yourself and effect positive outcomes thru the use of emotions
distributive self efficacy
belief in your abilities to claim resources effectively
integrative self efficacy
belief in ability to create resources
money, trust, security, happiness, etc
how much utility we derive depends on who is providing it
how tangible is it
deterrence based trust
consistency of behavior; people will follow thru on what they promise to do
knowledge based truth
grounded in predictability; i know him enough to understand them and accurately predict their behavior
reverse psychology; telling someone they don’t’ want to do something so they do it
identification based trust
grounded in empathy w another person’s desires and intentions
cognitive route
building trust based on rational and deliberate thoughts and considerations
affective route
building trust based on intuition and emotion
personal conflict
aka emotional conflict; personal , defensive, resentful
task conflict
aka cognitive conflict; largely depersonalized
mere exposure effect
the more we are exposed to something the more we like it; very powerful; occurs below the level of our awareness
propinquity effect
has to do with functional distance; idea that you are more likely to become friends with people you sit next to than people you site near
reciprocity principle
we feel obligated to return in kind what others have offered or given us
self disclosure
sharing information about ones-self w another person; build relationship while making yourself vulnerable
defection; biggest threat to trust in a relationship; to violate the established trust
dispositional attribution
one that calls into question another person’s character by criticizing them as the cause
judgmental, consistent, immediate, inferential
halo effect
believing that people we like and trust are also intelligent and capable
forked-tail effect
once we form a negative impression of someone – everything else they do is negative
communal norms
we should take care of people we love etc; opposite exchange norms
merit based rule
equity rule; more contribution =more return
market pricing
everything is reduced to a single value or utility metric
Categories: Negotiation