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