Decision-Analytic Approach
- Want to give the best advice to focal negotiators involved in real conflict with real people (consider that people aren’t always rational
Analytical structure based on the assessment of three key sets of info
- each party’s best alternative to a negotiated agreement (BATNA)
- each party’s set of interests
- the relative importance of each party’s interests
- each party’s best alternative to a negotiated agreement (BATNA)
- Determines negotiators reservation point – accept what’s above (rather than impasse), decline what’s below
- When we fail to consider BATNA, emotions hold sway and we make wrong decisions
- each party’s set of interests
- Positions = what parties demand from the other side
- Interest = motive behind those positions
- Focus on deeper interests can suggest creative solutions that help each side get more of what they want
Primary tasks of negotiation
- Claiming value
2. Creating value
- Claiming value
slicing the pie
- bargaining zone
(positive: reservation points overlap
negative: reservation points don’t overlap –> no agreement possible)
- Creating value
Contingent contracts
increases size of pie
- creating value by identifying and adding issues (assessing each parties interests)
- possible whenever one party weighs issues differently than the other
(- trade issues of differential value)
Contingent contracts
- Create value through the development of bets (= actual outcome unknown)
- If-then agreement that states which actions under certain conditions will result in specific outcomes
- Usually occur when parties fail to reach an agreement
- Allow parties to bet on their own (biased) beliefs, thus allow agreement despite biases
- Rejection reveals bluffs & false claims
- Incentive to perform at/ above contractually specified levels (e.g. sales commissions
Tools of Value Creation
- build trust and share information
- ask questions and listen actively
- strategically disclose information
- negotiate multiple issues simultaneously
- make multiple offers simultaneously (each equally valuable to me)
- Search for post-settlement settlements (PSS) –> Pareto-superior agreement - one that is potentially even better for both parties than the agreement they already reached (f.e. offered by a third party)
Increasing Power in Negotiations
- Alternatives (BATNA): having multiple alternatives, particularly if at least one of them is highly attractive
- Information: Strategic advantage as one can leverage that info
- Status: Extent to which the negotiator is respected by the other side
- Social Capital: Bigger network improved alternatives, capacity to acquire more valuable info, increased probability of being seen as having high status
Negotiator Cognition (mistakes)
- Fixed-pie assumption
- Framing effects
- Escalation of conflict
- Overestimation of own value
- Self-serving bias
- Anchoring
Fixed-pie assumption
assumption that their interests necessarily and directly conflict with the other party’s interests
Framing effect
- a cognitive bias where people decide on options based on whether the options are presented with positive or negative connotations
- Negotiators with negative frames are less likely to make concessions & reach mutually beneficial outcomes
- -> Incompatibility bias
Escalation of conflict
- The other side will hold out when it has “too much invested” in its position to now quit
- Announcements of one’s rigid positions increases one’s tendency to escalate non-rationally
Overestimation of own value
- Overestimation of chance that the other side will give you what you want (wrongly set BATNA)
- No positive bargaining zone
- Most likely when knowledge is limited
Self-serving bias
a form of cognitive bias –> people’s tendency to attribute positive events to their own character but attribute negative events to external factors
Anchoring
First offers have a strong anchoring effect
Other Factors Influencing Negotiations
- relations self-construal
- trust propensity
Zero-sum perceptions
Relations self-construal
if one person benefits, the other must make a sacrifice (either-or strategy of conflict resolution
Interdependence theory (Relations self-construal)
- transformation of motivation – one departs from self-interested goals to make choices that are prosocial or promote the well-being of relationship partners
- Alternative to zero-sum thinking: win-win perception – individuals focus on the long-term benefits of sacrificing their self-interest
Relational self-construal
individual defines him/herself in terms of relationships with close others
Trust Propensity
Degree to which a person has benevolent (kind/well meaning) expectations of others, even those with whom the person has had no prior interaction
- high = more cooperative (van make you more vulnerable though)
- low = vice versa
Cultural differences - cultural intelligence
understanding and appreciation of cultural differences
- high = more relationship management = more cooperative = higher joint gains
East vs West
EAST
- Higher emphasis on relational outcomes
- Persuasion & offer making strategy –> more value claiming
- Low trust (more for ingroup)
- Less direct mode of confrontation –> “downgraders”
- Show less obvious dominance
WEST
- Higher emphasis on economic outcomes
- Information exchange –> more value creation
- High trust
- More direct mode of confrontation –> “upgraders”
- Show more obvious dominance
Intra-Cultural vs Inter-Cultural Negotiation - China vs USA
- Chinese regard ethically questionable negotiation tactics as more acceptable than Americans
- Americans focus on procedure and Chinese focus on outcome
- stronger in-group bias in China (tendency that people have to favor their own group above that of others)
- Chinese more insecure in inter-cultural negotiations so use more moral tactics to seek certainties by doing the “right” thing
