Complex Integrative Negotiations
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Transcript of Complex Integrative Negotiations
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Day 6
Complex Integrative Negotiations
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Complex Integrative Agreements
Make a proposal incorporating all issues Make multiple equivalent offers simultaneously Ask what is wrong with your proposal Ask diagnostic questions and listen; dont argue Build trust and be cooperative share integrative
information (do not disclose your reservation price) Trade off when there are differences in preferences Be firm on interests, but open to options Try post-settlement settlements
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Runs & Financing Trade-off
OutcomeWCHI/
Hollyville Price #Runs Financing
A 1.49/0.89 $46,000 625% Y(0)
25% Y(1-3)B 1.5/2.5 $55,000 8 100% Y(0)C 3.0/1.0 $40,000 8 100% Y(0)
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Advanced Methods for Uncovering Interests/Positions
MESO Multiple Equivalent Simultaneous Offers
Contingency Contracts
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Benefits of Making Multiple Equivalent Simultaneous Offers
Anchor and re-anchor the negotiation Gather information from the other side about
relative priorities Help unskilled negotiators Be aggressive and persistent while signaling
cooperation Test what the other side is telling you Make concessions that are cheap for you Highlight your own value added Control the process of the negotiation
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Concerns about MESOs
Giving away information Takes time Becoming attached to your proposals Danger of cherry-picking
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Adding Juniors
OutcomeWCHI/
Hollyville Price #Runs Financing Other
A 1.49/0.89 $46,000 625% Y(0)
25% Y(1-3)B 1.5/2.5 $55,000 8 100% Y(0)C 3.0/1.0 $40,000 8 100% Y(0)D 2.0/3.0 $55,000 8 100% Y(0) Juniors ($15K)E 3.5/1.5 $40,000 8 100% Y(0) Juniors ($15K)
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Betting on Differences in Expectations
The Problem Different expectations of future ratings
Ratings WCHI HOLLYVILLE2-3 20% 10%3-4 50% 10%4-5 10% 10%5-6 10% 50%6-7 10% 20%
Likelihood
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Betting on Differences in Expectations
The Problem Different expectations of future ratings
The Solution Bet on different expectations
If ratings are < 4, WCHI receives $1M rebate from Hollyville If ratings are > 5, WCHI pays $1M surcharge to Hollyville WCHI .7($1M) + .1($0) + .2(-$1M) = $500,000 Hollyville .2($-1M) + .1($0) + .7($1M) = $500,000
Expected Value
Ratings WCHI HOLLYVILLE2-3 20% 10%3-4 50% 10%4-5 10% 10%5-6 10% 50%6-7 10% 20%
Likelihood
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Contingency Contracts Build on differences. Dont argue over the
future, bet on it Allow negotiators to spread risk through risk-
sharing Allow negotiators to solve problems of trust
without confrontation Increase the incentive of parties to perform at
or above contractually specified levels Great lie-detection device diagnose honesty
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Structural Features of Successful Contingent Contracts
Require continued interaction between parties Require enforceability Require clarity and measurability But, be careful of contingency contracts when
You cant afford to lose Other side has more information than you There is no objective measure of what happened
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Capitalizing on Differences in Parties Preferences
Differences in priorities (logrolling) Differences in the assessments of the probability
of future events Differences in risk preferences Differences in time preferences Trade off on differences: when the other side
cares more about something than you do, you want them to have it, but at a price
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Negotiation in Teams
Advantages Higher Joint Gains Perceived Power
Disadvantages Coordination loss Risky shift
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Types of Intragroup Conflict (Jehn & Benersky)
Type of conflict is based on what it is about, not the level of emotion involved
Task conflicts
Relationship conflicts
Process Conflict
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Task Conflict
Increases performance/creativity (at moderate levels) More divergent viewpoints More critical evaluation of alternatives More communication & problem solving More task focus Greater sense of challenge increases effort
Reduces satisfaction and consensus Increases anxiety and tension
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Relationship Conflict
Reduces performance/creativity Distraction, misspent time/effort Limits cognition Decreases access to new information Group process focused on resolving or retaliating
Reduces satisfaction and consensus Decreases commitment Decreases cooperation & goodwill
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Process Conflict
Sometimes increases performance/creativity Increases evaluation of processes and standards Increases appropriateness of task and resource
assignments
Mostly reduces satisfaction and consensus Increases claim and blame perspective Feelings of personal attack Unfairness and inequity primed
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Negotiation in Teams
Key ingredients for success Skill mix Shared understanding/Norms Trust
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Techniques for improving team outcomes
Prepare prepare prepare Agree on Substance:
Assure firm agreement interests and priorities that underlie BATNA, RP, & Targets
Agree on information that can/should be revealed and what should not
Determine Roles Skill and ability assessment
Plan the process Use Caucuses or recess strategically
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Working as a team can be particularly beneficial in the following situations:
1.The negotiation is complex, requiring a diverse set of knowledge, abilities, or expertise. 2.The negotiation has great potential for creative, integrative solutions. 3.Diverse constituencies and interests must be represented at the table, as in union negotiations.
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Working as a team can be particularly beneficial in the following situations:
4. You want to display your strength to the other side, for example, in international contexts where teams are expected.
5. You want to signal to the other side that you take the
negotiation very seriously, as in a merger or acquisition. 6. You trust and respect available team members
7. You have sufficient time to organize and coordinate a team effort.
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Negotiator Toolbox: Integrative Negotiation Strategies
Prepare a scoring system Analyze issues, BATNAs, and reservation prices - think about
interests underlying positions Use the negotiations to collect information about integrative
possibilities Make a proposal incorporating all issues Make multiple equivalent offers simultaneously Ask what is wrong with your proposal Ask diagnostic questions and listen; dont argue Build trust and be cooperative share integrative information (do not
disclose your reservation price) Trade off when there are differences in preferences Be firm on interests, but open to options Try post-settlement settlements
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Negotiator Toolbox: Integrative Negotiations Strategies Continued
Build on differences Fractionate/Add issues Trade issues with different priorities Use contingent contracts
Test the truth Multiple equivalent offers simultaneously Contingent contracts
Create an atmosphere for problem-solving