Lec.

10 - Negotiation
AMP
(Rational approach)
Game theory -> Extreme simplification of the negotiation dimensions: only
The game-theoretic
payoffs matter (no emotions, no “justice”, no time, no care for long-term
framework
consequences on the relationship, etc.)
Human beings (and thus, negotiators) are boundedly rational:
• have limited cognitive/processing capacities
• miss/neglect pieces of relevant information
A preliminary distinction: Games against nature (GANs) vs Strategic games (SGs)
(e.g., see Aumann & Dreeze, 2009)
What do we intend for behaving rationally in GANs and SGs?
Rationality
• GANs: maximize (expected) utility
• SGs: maximize (expected) utility + thinking about others’ incentives!
(If thinking about others’ thinking does
not matter (if at most level-1 reasoning matters) a situation may be reduced to a
“game against nature") (Nagel, Smchit doc. s.5), but in SG there is 2 decision
makers to make the decision, the decision of one effects the other.
In a symmetric game all players have the same choice alternatives and payoff
Asymmetric vs symmetric consequences given other players’ choices, whereas in an asymmetric game there
games are differences between the players in terms of alternatives and payoff
consequences.
Two players can choose between two actions, namely cooperate (i.e., invest in a
Prisoner’s dilemma common good) and defect (i.e., free ride on the other’s investment). In this game,
defecting is a dominant strategy for both players, so that the unique Nash
(Marchiori, Nagel, & equilibrium is the profile (defect, defect). Thus, the socially desirable action
Schmidt, 2019) profile in which both players cooperate is not stable, at least in the one-shot
game.
This game depicts a situation in which both players are
Entry game better off coordinating on one of the two available actions but have contrasting
(Marchiori, Nagel, & preferences on which action to coordinate. The entry game is an instance of the
Schmidt, 2019) Battle of the Sexes games, in which the players’ preferences on the two Nash
equilibria are conflicting.
In this game, players have to coordinate their efforts. Two players select between
two possible levels of effort to exert (high and low), and the payoff from
coordinating on the high effort is larger than that from coordinating on the low
Stag-hunt game
one. Coordination on high and low efforts are the two pure-strategy Nash
(Marchiori, Nagel, &
equilibria of the game. Although, high-effort coordination (also referred to as the
Schmidt, 2019) payoff
dominant equilibrium) is more desirable, it is also associated with considerable
strategic uncertainty.
The nash equilibrium is reached by both players cooperating and get their second
Prisoner’s delight
choices. “My cooperation benefits me even if you don’t cooperate”. Your first
(Marchiori, Nagel, &
choice would be to do nothing and let the other do all the work, but cooperation
Schmidt, 2019) means better outcome, so you’ll do it.
Pure strategy and mixed A pure strategy determines all your moves during the game (and should therefore
strategy specify your moves for all possible other players' moves).
A mixed strategy is a probability distribution over two or more pure strategies
(That is, the players choose randomly among their options in equilibrium). After
a player has determined a mixed strategy at the beginning of the game, using a
randomizing device, that player may pick one of those pure strategies and then
 stick to it.
Matching Pennies is a zero-sum game in that one player’s gain is the other’s loss.
Matching pennies You win half the time and lose half the time, doesn’t matter what you do, you
(Marchiori, Nagel, & can’t change your outcome, you’re just as happy doing A than doing B. This
Schmidt, 2019) game does not have any Nash equilibria in pure strategies, but only one mixed
strategy equilibrium in which players are supposed to randomize their actions.
Incumbent-challenger In the one-sided (incumbent-challenger) game one player (the “incumbent”) has a
dominant strategy while the other player’s (the “challenger”) preferred action
game
depends on what the incumbent does. Knowing that the incumbent has a
(Marchiori, Nagel, & dominant strategy the challenger will select the action that best replies to the
Schmidt, 2019) incumbent’s dominant strategy.
Two player have to agree on the division of e.g. 10$, P1 can chose how to split
Ultimatum bargaining them, but if P2 rejects his offer both will get 0.
(Guth et al., 1982) If player B was rational he would accept anything, because 0<x, the uniqie SPE
would be that P1 offers 0 and P2 accepts all offers.
P1 have incentive to offer δ(delta) as it will lead P2 to potential accept
Alternating offer
immediately and result in a SPE. P1 loses more if P2 rejects first offer.
bargaining
https://www.youtube.com/watch?v=B9MPb98T78M
They focus on descriptive research, which recognizes that negotiators do not
always behave in a game-theoretic, optimal fashion. For example, whereas
normative models predict that people should almost always defect in a prisoner’s
Negotiation
dilemma or social dilemma, actual defection rates are way lower than 100%
(Thompson, Wang and.
They examine the individual negotiator within one or more of five systems –
Gunia, 2010) intrapersonal, interpersonal, group, organization, and virtual and within each
system they focus on overarching themes as integrative negotiation and
distributive negotiation.
Thompson use the term “intrapersonal system” to signify the ways that
negotiation behavior and outcomes depend upon the perceptions and inner
experiences of the negotiator. (Individual characteristics that influence behavior)

The interpersonal system refers to the ways that negotiators’ behavior and
outcomes depend upon the presence of the other party or parties
Intrapersonal conflict occurs within ourselves, while interpersonal conflict occurs
between two people

The group system focuses on how group dynamics influence negotiation

processes and outcomes. Main concepts: group identity, group dynamics, culture.
Systems and themes
short explanation The organizational system examines the negotiator as embedded in a larger
(Thompson, Wang and network or marketplace (represents are higher level of analysis).
Gunia, 2010)
The virtual system focuses on how negotiators’ medium of interaction such
as face-to-face, phone, or email, affects the nature and quality of negotiation
processes and outcomes

By integrative, they mean the extent to which the negotiated outcome satisfies the
interests of both parties in a way that implies the outcome cannot be improved
upon without hurting one or more of the parties involved (Pareto optimality)
(Pareto 1935)

The distributive aspect of negotiation refers to how negotiators divide or

apportion scarce resources among themselves
The five systems Intrapersonal level
explained in depth as to  Power - Power refers to an individual’s relative ability to alter other
how they affect the people’s outcomes (Keltner et al. 2003).
individual negotiator - A negotiator’s BATNA has become the primary indicator of a
(Thompson, Wang and negotiator’s relative power in negotiation.
Gunia, 2010) - If you have an attractive RP (bottom line) you’ll be in a more
powerful position as well as they could simply offer the other party
just enough to meet their RP and claim the rest (the surplus) for
themselves.
- You have a bargaining zone which is the overlap between 2
negotiator’s RPs (Buyers RP minus Sellers RP). Only if this number
is positive, a zone possible agreement (ZOPA) exist, if not – no
ZOPA exist.
- Powerful people move first, both by initiating negotiations and by
making the first offer (Magee et al. 2007).
- You can also use personal power (e.g. Gender) to dominate others in
social relationships. (BATNA is a measure of structural power)
 Gender - One source of personal power is gender. To exert influence in a
negotiation, gender must be made salient (Kray & Thompson 2005).
- The prevailing stereotype is that women are less assertive and agentic
than men. Might create an internal conflict within women (confuses
them on how to behave in negotiation) (p.496)
- However, it was reasoned that explicit activation of the gender
stereotype may allow women to counteract it.
- Kray & colleagues, 2004 reasoned that negotiation, can be construed
as masculine or feminine activity. Masculine  involves agency and
assertiveness, where feminine  nonverbal cues and building trust.
- De Dreu et al., 2000 argues that social motives explain cooperation in
negotiation better than gender does, as research show prosocial
motives leads to better outcomes than acting with egoistic motives.
 Affect - Forgas’s (1995) affect infusion model considers the impact of
mood on cognitive processing/information processing
- The implication for negotiation processes and outcomes is that
feeling good or bad should have important consequences for
negotiator cognition and strategies (Lanzetta 1989).
- Negotiators with low RPs felt more successful than did those with
high RPs, even though their final settlements were identical.
- Negotiators might feel dissatisfied when the counterparty accepts
their first offer (Galinsky et al. 2002).
- Focusing on the target price during a negotiation and the BATNA
after a negotiation allowed negotiators to achieve superior outcomes
without the accompanying dissatisfaction.
Interpersonal level
 Economic and social psychological foundations
- Negotiations were traditionally viewed through the lens of mixed-
motive interaction which refers to situations where 2 or more parties
face a conflict between cooperation (to avoid impasse and reach
mutual agreement) and competition (to gain sufficient resources for
themselves.), Schelling, 1960
- Dominance complementarity demonstrate that when one party
complements dominant behavior with submissive behavior, this
facilitates interpersonal liking (Tiedens & Fragale 2003).
 Interpersonal effects of emotions in negotiation - Kleef et al., 2004a
 argues that anger and happiness is the most important emotions to look at
- People used emotion information to infer the other’s limit (i.e., their
RP), and they adjusted their demands accordingly.
- Participants were only affected by the other’s emotion under low
rather than high time pressure, because time pressure reduced their
capacity for information processing.
- Motivated information-processing model argues that negotiators are
only affected by their opponent’s emotions if they are motivated to
consider them.
 Interpersonal improvisation in negotiation - Beyond the focus on
economic outcomes in negotiations, negotiators may sometimes also be
focused on relationship processes and outcomes (McGinn & Keros
2002).
- McGinn & Keros, 2002, highlights improvisation and the logic of
exchange in socially embedded transactions which goes beyond the
focus on outcomes alone; they tend to focus on rules of friendships as
opposed to rules of the market.
- That contrasts with the arm’s length transaction between individuals,
where you share little familiarity or affect and follows the logic of
profit maximization (Granovetter, 1973 and others). (page 500)
- Social embeddedness, or the extent to which an individual shares
other social connection with another individual (Granovetter 1973),
eases coordination within negotiation (McGinn &Keros 2002).
 Subjective value in negotiation – Negotiators are also concerned about
their feelings about them self, the negotiation process, and the
relationship  The subjective value (Curhan et al. 2006).
- The “subjective value” accrued from these components of negotiation
have long-lasting impact (Curhan et al. 2009).
- Subjective value measured at the outset of a negotiation predicted
managers’ job satisfaction and likelihood of quitting a full one year
later.
 Trust and tactics - Mutual trust is an essential ingredient in effective
organizations and negotiations (Kimmel et al. 1980).
- 2 types of negotiators respectively distrusting negotiators who are
reluctant to share information or ask questions and trusting
negotiators who believe their counterpart will use information to
identify integrative agreements.
- The more negotiators stand to gain economically, the more likely
they are to lie (Bazerman et al. 1998)
- In a given negotiation, tactics such as threats, bluffs, and disclaimers
can affect negotiators’ relationships and the grounds for their trust.
 Relationships and negotiations – Can negotiations where people is
involved in a relationship fashion integrative agreements better than
strangers can?
- Friends who are high in communal orientation are more likely to
allocate resources equally than are friends low in communal
orientation.
- Glynn’s, 2000, study illustrates that relationships not only influence
negotiations, but negotiations can reconstitute and reshape
relationships.
Group level
 Social and group identity
- For negotiation the group identity perspective (Tajfel et al. 1971)
 implies, that distributive (personal gains) are less important than
integrative (mutual gains) for negotiators who consider counterparts a
member of their group.
- This perspective has been further analyzed in the social dilemma
literature which examines situations where individual and collective
interest are largely opposed. The literature/opinion splits the
perspective into economic and psychological viewpoints.
- In a social dilemma situation, the economic point of view asserts that
the rational choice is to defect because it yields greater outcomes,
whereas the social psychological viewpoints is that defection is
undesirable and people are best served when everyone puts self-
interest aside and chooses to maximize group interests.
- Kerr & Kaufman-Gilliland, 1994 found strong support for the idea
that it is negotiators’ verbal promises that increase cooperation in
social dilemmas, not simply the extent to which negotiators feel
identified with their group. (page 503)
 Relational and collective identity
- Markus & Kitayama (1991) focused on whether people hold
independent or interdependent identities, or self-construals.
- Independent self-construal defines himself in terms of the attributes,
preferences, and traits that make him unique and autonomous.
- A person with an interdependent self-construal is more likely to
define himself or herself in terms of his or her social and group
relationships.
- Seeley et al (2007) found that the interdependent self-construals seem
to evoke a benevolent (kindly) use of power in dyadic
contexts( interaction) but a more exploitative use of power in
intergroup contexts.
 Culture
- Western culture tend to judge outcomes by the joint profit that
accrues and the value they themselves claim. Where Non-western
cultures tend to focus
BATNA: determines the point at which a negotiator is prepared to walk away
from the negotiation table. In practice, it means that the negotiators should be
willing to accept any set of terms superior to their BATNA and to reject
outcomes that are worse than their BATNA. (An improved term of CLalt)

ZOPA – Zone of Possible Agreements. All the agreements in which all sides get
Best alternative to a more than their BATNA
negotiated agreement –
Terms explained Pareto frontier. All the agreements that cannot be replaced with an alternative
(Thompson et al. 2010) agreement that makes all sides happier. Change would make 1 person better off
but the other worse off.

Reservation point (RP): According to Raiffa (1982), a negotiator’s RP is the point

at which a negotiator is indifferent between reaching a deal with party A or
walking away from the table and exercising his/her BATNA. (An improved term
of resistance point)
Lec. 11 - Negotiation + Lec. 12 - Principled vs positional negotiation: Negotiation techniques to
(Behavioral Approach) improve negotiation efficiency
A Decision-Making Raiffa, 1982 developed a decision-analytic approach to negotiations, one that
Perspective to described how “erring folks like you and me actually behave” rather than
 “how we should behave if we were smarter, thought harder, were more
consistent, were all-knowing”.
He looked at the structure of the negotiation and the common errors that
negotiators often make. E.g. being affected by biases, social relationships or
ethics.
Raiffa  prescriptive decision-analytic approach
In response to Raiffa: Bazerman & Neale, 1992; Thompson 2005; Bazerman &
Moore, 2008  Behavioral decision theory
In response to Bazerman et al.: Barney, 1991; Greenhalgh & Chapman, 1995 
criticized it saying it missed social factors like:
• Social relationship - People often care far more about their relative than
their absolute outcomes, preferring Pareto-inefficient outcomes in order
to avoid being comparatively disadvantaged
• Egocentrism - Thompson & Loewenstein (1992) showed that negotiators
are egocentric and that the more egocentric parties are, the higher the
likelihood of impasse (deadlock = no outcome).
• Attribution and construal processes - Lee Ross and Andrew Ward (1996)
found that negotiators tend to exaggerate the polarization between two
Negotiation: A Review of
groups in conflict.
the Past and a Look to
• Motivated illusions - Human beings see themselves, their side of a
the Future
negotiation, and the future in a considerably more positive light than
(Tsay & Bazerman, 2009) more realistic assessments would justify (Taylor 1989; Kramer 1994).

Tsay & Bazerman preview other potential directions in negotiation practice:

• Ethics in negotiation - When one party views the other as unethical and
the other party sees herself or himself as perfectly ethical, a significant
barrier exists in moving their negotiated relationship forward.
• Emotions - Early studies found that anger makes negotiators more self-
centered in their preferences (Loewenstein, Thompson, and Bazerman
1989) and increases the likelihood that they will reject profitable offers in
ultimatum games (Pillutla & Murnighan 1996).Willis & Todorov, 2007
talk about facial dynamics having an impact as well.
• Negotiator intuition - Some intriguing recent work has suggested that our
intuition may indeed allow us to arrive at better decisions (Nordgren &
Dijksterhuis 2006), particularly when it comes to complex decision
problems.
• The natural negotiator – Some thinks your born with negotiation skills,
but the teaching side of the negotiation field has developed around the
idea that we can all learn to be better negotiators.
level-1 players ignore that other players may have beliefs about other players and
Negotiation levels
that these beliefs may affect their actions.
(Nagel, Marchiorim,
Players at level 2 or higher form beliefs about how other players think, and these
Schmidt) beliefs affect their preferred actions.
Lec. 12 - Principled vs
Negotiation techniques to improve negotiation efficiency
positional negotiation:
• Integrative: the extent to which the negotiated outcome satisfies the interests of
Integrative and both parties in a way that the outcome cannot be improved upon without hurting
Distributive aspects one or more of the parties involved (i.e., Pareto optimality)
(Schelling, 1960) • Distributive aspect: refers to how negotiators divide or apportion scarce
resources among themselves
Negotiation facts Three criteria to judge a negotiation:
 • should produce a wise agreement if agreement is possible
• should be efficient
• should improve or at least not damage the relationship between the parties

DO NOT BARGAIN OVER POSITION: (Fisher & Uri)

Positional bargaining thus strains and sometimes shatters the relationship
between the parties + is inefficient as it creates incentives that stall settlement.
(Fisher & Uri, 1991)
If it’s a in multi-party negotiation it is near impossible to come to an agreement.

A basic fact about negotiation, easy to forget in corporate and international

transactions, is that you are dealing not with abstract representatives of the
"other side," but with human beings.(s.14)

Hard vs. soft positional

bargaining
The soft negotiator wants to avoid personal conflict and so makes concessions
(Fisher & Uri, 1991) readily in order to reach agreement.
Pros: If it’s 2 soft negotiators an agreement is becomes more likely to happen and
the process to get there tends to be efficient, at least to the extent of producing
results quickly.
Cons: Usually ends up being exploited and feeling bitter. If the other uses a hard-
bargaining tactic, the outcome is usually in the hard negotiators favor which
might not result in an optimal and wise agreement. If it’s 2 soft negotiators you
might end up with a sloppy agreement as both parties want to be more generous
than the other.
The hard negotiator sees any situation as a contest of wills in which the side that
takes the more extreme positions and holds out longer fares better
Pros: If you use it and it works, you’ll have your say.
Cons: High costs particularly on the parties and their relationship.
Principled Basic points:
negotiation(PN) What is interests: Interests motivate people; they are the silent movers behind the
(response to the hard hubbub of positions. Your interests are what caused you to decide (s. 24)
and soft bargaining style) 1. Separate the PEOPLE from the Problem by working on:
(Fisher & Uri, 1991) • Emotions: Recognize and understand emotions, theirs and yours; Make
emotions explicit(discuss them) and acknowledge them as legitimate;
Allow the other side to let off steam. Typical error in negotiation is that
Part 1: Page 1 - 49 on both the giving and receiving end, we are likely to treat people and
problem as one.
• Communication: Listen; Speak to be understood; Speak about yourself,
not about them; Speak with a purpose (s.22)
  Prevention: Build a working relationship where trust, understanding,
respect, and friendship are built up over time can make each new
negotiation smoother and more efficient.
 The ability to see the situation as the other side sees it, as difficult as it
may be, is one of the most important skills a negotiator can possess. (s.
16)
 Apart from the substantive merits, the feeling of participation in the
process is perhaps the single most important factor in determining
whether a negotiator accepts a proposal. (s. 18)
2. Focus on INTERESTS, Not Positions
• Communicate and acknowledge interests - Commit to your interests.
Agreement is often made possible precisely because interests differ!
• We tend to assume that because the other side's positions are opposed to
ours, their interests must also be opposed. (s. 24)
• Two negotiators, each pushing hard for their interests, will often
stimulate each other's creativity in thinking up mutually advantageous
solutions. (s. 30)
• Attack the problem without blaming the people. Go even further and be
personally supportive: Listen to them with respect, show them courtesy,
express your appreciation for their time and effort, emphasize your
concern with meeting their basic needs, and so on. Show them that you
are attacking the problem, not them.
• A well-known theory of psychology, the theory of cognitive dissonance,
holds that people dislike inconsistency and will act to eliminate it. (s. 30)
3. Invent OPTIONS for Mutual Gain
3.1. Major obstacles that inhibit the inventing of new options:
• premature judgment (excessive criticism) (over-thinking it)
• searching for the single answer (lack of creativity) - fear that free
floating(brainstorming) discussion will only delay and confuse the
process
• the assumption of a fixed pie - Why bother to invent if all the options
are obvious and I can satisfy you only at my own expense?
• thinking that "solving their problem is their problem" - A final obstacle
to inventing realistic options lies in each side's concern with only its own
immediate interests.
3.2. How to overcome the highlighted obstacles?
• separate the act of inventing from the act of judging options (Separate
inventing from deciding – Invent first, decide later)
• broaden the options on the table rather than look for a single answer
(brainstorming sessions, even with the counterpart)
o You can broaden your options by inventing options which
involves 4 types of thinking – 1. Think about the particular
problem 2. Make a descriptive analysis 3. Consider what ought
to be done 4. Make a suggestion for action. (s.36).
o Could be combined with the perspective of looking through the
eyes of different experts. Thereby u get every angle (s.37)
• search for mutual gains (turn a win-lose to a win-win situation, look for
shared interests)
o Three points about shared interests that are worth
remembering: 1. Shared interests lie hidden in every
 negotiation. 2. Shared interests are opportunities, not godsend,
you need to make something out of them. 3. Stressing your
shared interests can make the negotiation smoother and more
amicable (friendly) (s.39)
• Invent ways of making their decisions easy.  E.g. one effective way to
develop solutions easy for the other side to accept is to shape them so
that they will appear legitimate.

4. Insist on Using Objective CRITERIA

• Develop beforehand alternative standards and think how they apply to
your case
• Adopt fair procedures
• Frame each issue as a joint search for objective criteria
• Reason and be open to reason
• Never yield to pressure, only to principle
• In positional bargaining, negotiators spend much of the time defending
their position and attacking the other side's. People using objective
criteria tend to use time more efficiently talking about possible
standards and solutions.
• It is the combination of openness to reason with insistence on a solution
based on objective criteria that makes principled negotiation so
persuasive and so effective at getting the other side to play. (s.47)

A principled negotiator is open to reasoned persuasion on the merits (what is

right and wrong); a positional bargainer is not.

To sum up, in contrast to positional bargaining, the principled negotiation

method of focusing on basic interests, mutually satisfying options, and fair
standards typically results in a wise agreement. The method permits you to
reach a gradual consensus on a joint decision efficiently without all the
transactional costs of digging in to positions only to have to dig yourself out of
them.
Principled NO METHOS CAN GUARANTEE SUCCESS IF ALL THE LEVERAGE LIES
negotiation(PN) ON THE OTHER SIDE!
(response to the hard In any negotiation there exist realities that are hard to change. In response to
and soft bargaining style) power, the most any method of negotiation can do is to meet two objectives: first,
(Fisher & Uri, 1991) to protect you against making an agreement you should reject and second, to help
you make the most of the assets you do have so that any agreement you reach will
satisfy your interests as well as possible.
Part 2: Page 50 - 90 1. What if they are more powerful than you?
• Protect yourself by using a bottom line that will establish the worst
acceptable outcome you can agree to.
o A bottom line will inhibit imagination and reduce the incentive to
invent a tailor-made solution and may keep you from accepting a
wise agreement (s. 50).
• Know your BATNA (Instead of ruling out any solution which does not
meet your bottom line, you can compare a proposal with your BATNA to
see whether it better satisfies your interests.)
o Generating possible BATNAs requires three distinct operations:
(1) inventing a list of actions you might conceivably take if no
 agreement is reached; (2) improving some of the more promising
ideas and converting them into practical alternatives; and (3)
selecting, tentatively, the one option that seems best.

2. What if they won’t play? (Use negotiation jujitsu)

• There are 3 approaches for if the opponent keeps using positional
bargaining and to turn them towards the merits.
1. Principle negotiation -You yourself can concentrate on the
merits, rather than on positions.

2. If that doesn’t work, use negotiation jujitsu

- Refuse to react. Resist their force and channel it into
exploring interest or invent option for mutual gain. (s. 55)
- Recast an attack on you as an attack on the problem
- Use questions instead of statements (statements generate
resistance <> questions generate answers) and use silence as
a weapon as people tend to feel uncomfortable with silence.

3. Bring in a third party to focus the discussion on interest,

options and criteria – one-text mediation procedure.
- The one-text procedure not only shifts the game away from
positional bargaining, it greatly simplifies the process both of
inventing options and of deciding jointly on one.
- More easily than one of those directly involved, a mediator
can separate the people from the problem and direct the
discussion to interests and options. Further, he or she can
often suggest some impartial basis for resolving differences.

3. What if they use dirty tricks?

• Learn to spot ploys that indicate deception. Recognize their tactic, raise
the issue explicitly, and question the tactic’s legitimacy and desirability.
If you bring up the tactic explicitly, you’ll get an opportunity to negotiate
about the rules of the game (s. 65).
o In proportion to PN it’s important to remember the 4 principles
when bringing it up  Don’t be attack personally for using a
tactic you consider illegitimate, focus on interest and not
positions, invent options for mutual gains, insist on using object
criteria e.g. asking “is there reason for me sitting here?”. Last
resort is to turn to your BATNA and walk out (s. 65)
• Some of the tricky tactics can be deliberate deception, psychological
warfare and positional pressure tactics. (examples 66-70)
Questions under Fisher & 1. Does positional bargaining ever make sense?
Uri article In virtually every case, the outcome will be better for both sides with
principled negotiation. The issue is whether it is worth the extra effort.
(examples p. 73)
2. What if the other side believes in a different standard of fairness?
In most negotiations there will be no one "right" or "fairest" answer;
people will advance different standards by which to judge what is fair.
Yet using external standards improves on haggling
3. Should I be fair if I don’t have to be?
We argue only that using independent standards to discuss the fairness
of a proposal is an idea that can help you get what you deserve and
protect you from getting taken
 4. What do I do if the people are the problem?
Our basic advice is the same whether people problems are one concern or
the main focus of your negotiation: Build a working relationship
independent of agreement or disagreement, negotiate the relationship,
distinguish how you treat them from how they treat you and deal
rationally with apparent irrationality.
5. Should I negotiate even with terrorists, or someone like Hitler? When
does it make sense not to negotiate?
However unsavory the other side, unless you have a better BATNA, the
question you face is not whether to negotiate, but how.
6. How should I adjust my negotiating approach to account for differences
of personality, gender, culture, and so on?
Some suggested guidelines: Adapt your behavior accordingly to the one
you negotiate with, pay attention to differences of belief and custom, but
avoid stereotyping individuals and question your assumptions; listen
actively.
7. What about practical questions like, 'Where should we meet?' 'Who
should make the first offer?' and 'How high should I start?’
Before a doctor can answer such questions as what pill to take what food
to avoid, he or she will want to learn about the patient's symptoms and
diagnose possible causes. Good tactical advice requires knowledge
of specific circumstances.
8. Concretely, how do I move from inventing options to making
commitments?
Not one best process, but general principles worth considering: Think
about closure from the beginning, consider crafting a framework
agreement, move toward commitment gradually. Be persistent in
pursuing your interests, but not rigid in pursuing any particular
solution. Make an offer, be generous at the end.
9. What is the best way to try out these ideas without taking too much risk?
Start small, make an investment, review your performance, prepare!
10. Can the way I negotiate really make a difference, if the other side is more
powerful?" And, "How do I enhance my negotiating power?
How you negotiate (and how you prepare to negotiate) can make an
enormous difference, whatever the relative strengths of each party.
(Examples page 85)
Lec. 13 - Coalitions &
AMP
positioning
Common negotiation  Social relationship: preserving the relationship and social comparisons
mistakes you should are important. Can justify decisions that are individually irrational, but
avoid that can outperform GT model.
(Tsay & Bazerman, 2009)  Egocentrism
 Motivated illusions: We perceive ourselves as being better than others on
desirable attributes, and we make unrealistically positive self-evaluations
(Messick et al. 1985). Which can ruin possibilities for a positive
outcome.
 Attributional processes: Kramer (1994) found that when the basis for
others’ behavior is ambiguous, people will tend to attribute it to sinister
motivations. Furthermore, when their opponents offer friendly
explanations for their behavior, negotiators discount them to the extent
that more sinister explanations are plausible (Robinson and Friedman
1995).
 - Such attributions are likely to engender blame and
hostility, making agreement difficult (Keltner and
Robinson 1993).
Coalition bargaining
(Columbia University, A Coalition may be loosely defined as a group of individuals that assemble
Managerial negotiating together to exert influence on one another.
B8412)
“When individuals approach negotiations with a fixed-pie mentality, they assume
Fixed pie of negotiation
that their interests’ conflict directly with the interests of the other side. They think
(Bazerman & Moore) they are in a fight for the biggest piece of the pie of fixed size”.
A Non-Technical A bargaining situation is a situation in which 2 or more players have a common
Introduction to interest to co-operate but have conflicting interests over exactly how to co-
Bargaining Theory operate.
(Muthoo, 2000) Some determinants of the bargaining outcome
 Impatience – A player’s value of time can depend on factors like income,
wealth or the market interest rate.
A player’s bargaining is greater the more patient she is, relative to the
other negotiator. An implication of this principle is that to enhance one’s
bargaining power, a player should try to decrease her haggling cost
and/or increase the other negotiator’s haggling cost. Will make you less
time sensitive and vice versa.
 Risk of breakdown – There could be exogenous and uncontrollable
factors that could cause a disagreement and result in parties walking
away from the negotiation table. This is in regarding to human behavior a
random possibility, another possible factor causing a breakdown could be
because of intervention (3rd party invent something that makes the
negotiation irrelevant).
Although it is mutually beneficial for the parties to strike a deal, the more
risk averse player is relatively more eager to minimize the risk of
breakdown.
 Outside options – Alternatives to what you negotiate about. E.g. if you’re
bargaining over a house. Sellers optimal price is 70K and buyer is 50K. If
seller was giving a 3rd offer between “50K < offer < 70K” from another
person, then that would be the outside options for seller. If buyer then
offers 60K for the house, the outside options must be less than 60K for it
to have no impact, but if above the seller gains bargaining power (as
seller can sell to the other if buyer won’t raise price). This principle is
called “outside option principle” (OOPS) (s. 155)
 Martial bargaining – A negotiator has 2 options while bargaining over a
deal respectively an “inside” and “outside” option. An inside option is a
negotiators payoff they obtain during the bargaining process (The
payoff/utility the person gets while the negotiations is in temporary
disagreement). Outside beats inside option. If both parties outside options
are unattractive, it’s whose inside option is most attractive that will
determine bargaining power. If both outside is attractive it’s mutual
beneficial to exercise them.
 Commitment tactics – A player with relatively higher cost of backing
down will find it more difficult to back down then the one with smaller
cost of backing down. Therefore, a player’s bargaining power is higher
the larger is its cost of backing down, and the smaller is the other player’s
cost of back down.
 Asymmetric information - A main consequence of this asymmetry in
 information is that an agreement may not be struck when, in fact, it
would be mutually beneficial to trade. The absence of complete
information will lead to inefficient bargaining outcomes.
Bullet points from the article:
 Patience during the process of negotiations confers bargaining power,
while risk aversion affects it adversely.
 A player’s outside option enhances her bargaining power if and only if it
is attractive and therefore credible.
 When both negotiators’ costs of backing down from their initial demands
are sufficiently large, then making such demands may risk leading the
negotiations into a stalemate.
 A player’s bargaining power is higher the larger is her cost of backing
down from her initial demand.
 Knowledge is veritable power in negotiations and enhances the
bargaining strength of the better informed.