Distributive Bargaining

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NEGOTIATION SKILLS
S2, 2012 WEEK 2: DISTRIBUTIVE BARGAINING

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Today’s lecture: Distributive bargaining
• • • • • The basic negotiation strategies Distributive bargaining scenarios Fundamentals of distributive bargaining Tasks to focus on Distributive tactics

• Results from conflict management styles survey

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Choosing a negotiation strategy
• Distributive

• Conflicting goals, fixed pie (“zerosum game”), task is to claim value and maximize personal gains • Shared goals, expandable pie (“winwin”), task is to create value, maximize joint gains • Both expanding the pie -- meeting needs of all or most parties as much as possible -- while claiming your share

• Integrative

• Mixed-Motive

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Negotiation strategies and value
Pareto Frontier: where one party cannot be better off without the other being worse off

Creating Value

Claiming Value

Shaded Region Represents All Mutually Acceptable Agreements

Value to Party A

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Typical distributive scenarios
• Haggling in a flea market • Hostile mergers • Decisions over allocation of scarce resources (e.g. budgets) • Border disputes • Water resource allocation

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Distributive bargaining: The Basics
• Elements of distributive negotiation:
• • • • “Fixed pie”; scarce resources Conflicting goals/interests Narrow bargaining mix Uncertainty of future relationship

• Aim is to maximise share

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Distributive bargaining: Why is it Important?
• All negotiations are potentially distributive
• Many people know only how to bargain distributively • Even integrative negotiations have distributive elements

• Essential to know how to counter distributive tactics

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Distributive bargaining: First step
• Target point - aspirational • Resistance point – walk-away

• Opening offer – tactical

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Distributive bargaining: Typical negotiation structure
Seller’s BATNA
Seller’s Resistance Point
Focal Points

Buyer’s BATNA Buyer’s Resistance Point
Better for Seller

Better for Buyer
Buyer’s Target Point

Zone of Possible Agreement (ZOPA)

Seller’s Target Point

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Distributive bargaining: Tactical Objectives
• Discover TOP‟s resistance point
▫ Key: What is their BATNA?

• Possible to change or improve it?
▫ Cost of delay ▫ Cost of dispruption ▫ How good is their BATNA?

• Each element of bargaining mix

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Fundamental tactics in distributive bargaining
• Acquire information on…
▫ Values ▫ Cost structures ▫ Goals ˚Target point ˚Resistance point Bargaining mix

• Influence:
What? • Beliefs • Attitudes • Positions • Interests How? • Screening •Selective presentation •Justification

• Manipulate costs of delay or termination

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Distributive bargaining: Strategic Tasks
• Assess TOP‟s resistance point
▫ Information re their BATNA ▫ Avoid disclosure of yours

• Change or improve it?
▫ Exploit weaknesses in their BATNA?

• Aim for settlement as close as possible to their resistance point ▫ Who opens? / opening offer ▫ Concession planning

• Each element of bargaining mix
▫ e.g. time preferences, risk aversion

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Distributive bargaining: Typical positions
• Opening offers
▫ Opportunity to anchor / risk of anchoring

• Opening stance
▫ Choice of attitude for negotiation

• Initial concessions
▫ Parties are more satisfied with progressive concessions

• Pattern of concessions
▫ Convey information – size and sequence

• Final offers
▫ Sounding the close

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Distributive bargaining I: Typical sequence
Seller’s BATNA Buyer’s BATNA Buyer’s Resistance Point

Seller’s Resistance Point

Pattern of concessions
Better for Buyer Buyer’s Target Point

Seller’s initial concession
Better for Seller

Zone of Possible Agreement (ZOPA)

Seller’s Target Point

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Hardball tactics
• • • • • • • Good cop/bad cop Lowball/highball Bogey Nibble Snow job Intimidation Aggressive behavior

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Dealing with hardball tactics
• • • • Ignore them /...
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