Negotiation

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Negotiation

• Spring 2009
• Course convenors
• Ivar BredesenRobert Hartnet

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Negotiation?
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Course objective

• The course aims to provide a thorough grounding
  in the science and practice of negotiation.
  Various academic disciplines (economics,
  psychology, sociology, politics, anthropology and
  mathematics) have researched negotiation from
  their particular standpoints and much of this
  material forms the basis for the scientific
  analysis of negotiation

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Course contents

• The course in negotiation will address
• What is negotiation?
• Preparation for negotiation
• Debate in negotiation
• Prososals and bargaining
• Rational bargaining
• Ploys and manipulation techniques

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Readings Negotiation
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Course structure

• The textbooks are international best selling
  books on negotiation
• The texts give examples and theories and these
  will be further developed in the case studies and
  essay questions

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Behavioural negotiation

• There are many ways to study negotiation
• Fisher and Ury Principled Negotiations
• Karass Ploys
• Kennedy Behavioural (process) model
• Negotiation is a lot more than ploys and tactics

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What would you do?

• You have been very busy at work lately, and this
  is the last day before your annual holiday
• Your family has already gone ahead to the villa
  you have rented
• Your taxi to the airport is waiting outside
• Your boss comes in and asks you to work on some
  customer account over the weekend

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Alternative methods of making decicions

• Say No
• Persuasion
• Problem-solve
• Chance
• Negotiate
• Litigation

• Arbitrate
• Coercion
• Postpone
• Instruct
• Give in

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Adam Smith (Book 1, ch. 2)

• Nobody ever saw a dog make a fair and deliberate
  exchange of one bone for another with another
  dog. Nobody ever saw one animal by its gestures
  and natural cries signify to another, this is
  mine, that yours I am willing to give this for
  that.
• But man has almost constant occasion for the help
  of his brethren, and it is in vain for him to
  expect it from their benevolence only. He will be
  more likely to prevail if he can interest their
  self-love in his favour, and show them that it is
  for their own advantage to do for him what he
  requires of them

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What is negotiation?

• Give me some of what I want and I will give you
  some of what you want
• The process by which we search for the terms to
  obtain what we want from somebody who wants
  something from us
• Negotiation is an explicit voluntary traded
  exchange between people who want something from
  each other

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Negotiation

• Negotiation is one of several means available to
  managers to assist in the making of decisions. It
  is neither superior nor inferior to other forms
  of decision-making - it is appropriate in some
  circumstances but not in others

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When do we negotiate?

• We negotiate
• When we need someone's consent
• When the time and effort of negotiating are
  justified by the potential outcome
• When the outcome is uncertain

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The four phases

• Negotiations involve a four stage process
• Preparation what do we want?
• Debate what do they want?
• Propose what wants might we trade?
• Bargain what wants will we trade

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What do you think?
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Red and blue behaviour

• Everyone will accept that an outcome will depend
  on both our own activity and the activity of
  others
• Is the opponent red or blue ?
• Red exploits the other party
• Protects oneself - I defect not because I want
  to, but because I must
• Has dishonest agenda and often seek zero-sum
  outcomes

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Red assumptions

• In a successful negotiation, both parties gain
  but one gains more than the other.
• We recognise that, far from being honest,
  negotiation is a web of even more delicate lies.
  A skilled negotiatior will appear friendly if
  this is the role he considers to be most
  effective, but will never sacrifice profit for
  friendship in his business dealings

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Red attitudes

• Be aggressively competitive and non-cooperative
• Dominate your opponents
• Seek always to win
• All deals are one-offs
• Use ploys and tricks
• Bluff and coerce
• Exploit the submissive

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Blue behaviour

• Blue wishes to be part of a team
• Extreme blue - naive, are often taken advantage
  of
• Within negotiations purple behaviour is often
  recommended

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Prisoners dilemma
Prisoner B
Confess
Deny
Confess
Prisoner A
Deny
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Blue and blue

• Only about 8 av players in negotiation games
  open with blue
• Blue is only selected if the other party opens
  with blue
• If the other player selects red, you will respond
  with red (tit-for-tat)
• Players need to trust each other before
  blue/blue behaviour will emerge

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Distributive Bargaining
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Single issue negotiation

• Vital (but probably unavailable) information is
  how little is John prepared to accept
• There is no obvious solution to this dilemma
• Zero sum game one loses what the other one
  gains
• Lose-lose is a possible outcome too and both
  strive hard to make the other party moving

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Single issue negotiation

• In negotiation we start with at least two
  solutions (yours and mine) to the same problem,
  and the objective is to end up with only one
  solution, if we can
• What is to be the agreed price for the used car?
• A negotiator opens with an entry price, the price
  he prefers to get. The gap between the entry
  prices for each negotiator is called the total
  negotiating range or the haggling range

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Negotiating range

• The negotiating range implies distance and
  movement
• After 12 hours of talks, we are still a long way
  apart
• Movement from entry prices are of course
  inevitable. No one opens with his final price

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Negotiating range

• There will always be a limit beyond which you do
  not want to go this is the exit price
• The exit price will normally lie somewhere in the
  negotiating range. Unless exit prices at least
  meet, there will be no agreement

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Negotiating range
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Settlement range
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Disclosing entry price can be dangerous
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The Run-down bar Negotiation
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The Run-down bar Negotiation
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Negotiators surplus

• Assume you are willing to sell a property for 150
  000 but hope to get 250 000
• The difference of 100 000 can be divided between
  buyer and seller settlement range

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Settlement range

• 115 is the lowest price the seller will accept
  and 120 is the highest price the buyer is
  prepared to pay
• Any price in between can be a settlement price

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Settlement price

• Diffence between settlement price and the seller
  exit price is called sellers surplus, and
  difference between settlement price and buyers
  exit price is called buyers surplus.
• Sum of buyers and sellers surplus is negotiators
  surplus