Negotiation

Spring 2011

Course convenors:

Ivar BredesenRobert Hartnet

Spring 2011

Course convenors:

Ivar BredesenRobert Hartnet

Negotiationhttp://home.hio.no/~ivar-br/fag/Negotiation/Negotiaton.htm

5 ECTS

7 lectures 11 January – 22 February

2 full days of practical training 3 and 4 March

4 hour closed book exam 22 March

Exam format: Case study + 3 essay questions

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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 negotiationFisher 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 holidayYour 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?

Agree Disagree

1Negotiators should not reveal their true feelings in case their opponents take advantage

2A magrinally acceptable deal is better than no dealat all

3If an opponent gives me an opportunity to takeadvantage discreetly, that`s their problem

4I will renegotiate profitable deals if the othernegotiator say they are in difficulties

5I look after my own interests and leaveopponents to look after theirs

6It is generally beneficial to be open aboutone`s true circumstances

7 I am worried about rejection when negotiating

8If opponents are too soft and can`t look afterthemselves, that`s their lookout

9 A good cause is more worthy than power

10When opponents buckle under pressure Ishould push harder

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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 partyProtects 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 teamExtreme blue - naive, are often taken

advantage of

Within negotiations – purple behaviour is often recommended

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Prisoners dilemma

Prisoner A

Confess Deny

Confess

Deny

Prisoner B

-5, -5 -1, -10

-2, -2-10, -1

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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