University of California Berkele y Haas School of Business Psych 253 Judgments and Decisions Negotiations Barbara Mellers Negotiations and Conflict Resolution
Mar 31, 2015
Psych 253 Judgments and Decisions
Negotiations
Barbara Mellers
Negotiations and Conflict Resolution
An independent service station in the Port of Los Angeles is for sale by owners (married couple)
Texoil, a large petroleum refining company, is a potential buyer (Texoil representative)
Parties have 5 minutes to prepare and 30 minutes to negotiate and discuss Texoil’s possible purchase of the service station
When you prepare, think about your BATNA, your reservation price, and your underlying INTERESTS!
Texoil
Texoil Rep. Station Owner
BATNA
Reservation Price
Interests
Each Side’s Information
Texoil Rep. Station Owner
BATNA
Reservation Price
Interests
$675,000(Build one)
$400,000 (BP offer)
Each Side’s Information
Texoil Rep. Station Owner
BATNA
Reservation Price
Interests
$675,000(Build one)
$400,000 (BP offer)
$500,000 Why not $675K? Minimart = $100K Upgrades = $??
$553,000 ($488,000 after taxes) Boat loan: $230,000 Boat ready: $68,000 Food, health, clothing: $75,000 Boat repairs: $40,000 Savings after return: $75,000
Each Side’s Information
Texoil Rep. Station Owner
BATNA
Reservation Price
Interests
$675,000(Build one)
$400,000 (BP offer)
$500,000 Why not $675K? Minimart = $100K Upgrades = $??
$553,000 ($488,000 after taxes) Boat loan: $230,000 Boat ready: $68,000 Food, health, clothing: $75,000 Boat repairs: $40,000 Savings after return: $75,000
Good price Good managers Station Ownership
Time off (2 years) Spouse’s health Sail around the world Savings / future income Health insurance, food, etc.
Each Side’s Information
Who reached an agreement?
What kind of information did you share?
What was the key to an agreement?
Initial Texoil Situation
Station Owner’s Reservation Price
($553,000)
Texoil Rep’s Reservation Price
($500,000)
500 550 600 650 700450
BATNAFor Texoil Rep
Sale Price (in thousands)
400
BATNA For Station Owner (or, stay put)
700
Station Owner’s Reservation Price
($467,000)
Texoil Rep’s Reservation Price
($500,000)
Revised Texoil Situation:If Texoil Representative includes Job Offer Upon Return
480 490 500 510 520470
Sale Price (in thousands)
460 530
Multiple issues Differing preferences, expectations, risk attitudes Differing interests Future relationship Multiple alternatives
Characteristics of Integrative Bargaining
Distributive IntegrativeBargaining Bargaining
One issue Many issues
Win-Lose Win-Win
Outcome Process and outcome
Max share of pie Max size and share of pie
One time Repeated times
One position Many options
Keep interests hidden Share interests
Keep information hidden Share information
Competitive Cooperative/Competitive
Position-based Interest-based
Analyze own & other’s interests
Analyze own & other’s priorities
Prepare multi-issue proposals
Think creatively about shared interests
Distributive IntegrativeBargaining Bargaining
Define your BATNA
Define your reservation price
Define your target level
Prepare objective rationales
TACTICS
Cooperate
Build trust
Make package deals
Make multiple offers simultaneously
Ask for and share info about interests & priorities
Open high
Anchor with first offer
Discuss single issue
Make bi-lateral, not unilateral concessions
Persuade through objective rationale
Negotiators may have:
Escalated commitment to positionsTried to win over all elseBelieved that the pie was fixed (other party’s interests
are opposite yours)Had positive illusions and unrealistic aspirations Had negative views of opponent
Why did impasses occur?
Separate people from problem Should you be a hard or soft negotiator? Focus on interests, not positions
Generate multiple possibilities Base results on objective standards
Integrative Negotiation
Improve outcomes
Create more stable agreements
Improve implementation
Strengthen the relationship
Advantages of Integrative Agreements
The non-separability of integrative and distributive negotiations “Value that has been created must be claimed”
Tactics that claim value can impede its creation Persuading, withholding information
Approaches to creating value are vulnerable to claiming tactics Disclosing interests, priorities
But..
The Prisoner’s Dilemma
Your Partner
Not confess Confess
2 yrs 0 yrs
Not confess
You2 yrs 10 yrs
10 yrs 5 yrs
Confess
0 yrs 5 yrs
The Negotiator's Dilemma
Your Counterpart
Create Claim
Good Great
Create
YouGood Terrible
Terrible Mediocre
Claim
Great Mediocre
Prepare for integrative and distributive opportunities Analyze own & other’s interests; avoid fixed-pie perception Know your BATNA, Res Price, objective arguments
Balance cooperation and competition Build trust: don’t jump in trusting immediately, but be open to a trusting
interaction Ask for and share info about interests & priorities, but watch out for unilateral
information exchange
Resolving the Dilemma