Distributive Bargaining - Negotiation - Lecture Slides, Slides of Business Management and Analysis

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MGT - Negotiation

Instruction : Distributive Negotiations

Seller’s Bargaining Range

Buyer’s Bargaining Range

BT BR S R S T

Negative Bargaining Zone

$10 $35 $40 $

Bargaining Zones

$

Seller’s surplus = $ Buyer’s surplus = $

Buyer’s Bargaining Range

BT S R BR S T

$10 $30 $40 $

Bargaining Zones

Seller’s Bargaining Range

Positive Bargaining Zone Surplus = $

Negotiator’s Surplus

 Negotiations are mixed-motive scenarios

 Parties must come to agreement to acquire any of the surplus (i.e., cooperation)  Best possible economic outcome for the negotiator is one that just meets the other party’s reservation point (i.e., competition)

Preparing for Distributive Negotiations

 Bargaining tactics may raise ethical questions

 Do not assume the other party shares your

ethical standards

 Undesirable settlement may result in

subsequent undesirable actions by either party

Engaging in Distributive Negotiations

 Make the first offer

 But only if you are well prepared

 Immediately re-anchor if the other party

opens first

 Plan your concessions

 Pattern: quid pro quo  Magnitude: graduated reduction in tension  Timing: immediate response not always best

Distributive Negotiations FAQs

 Should I reveal my reservation point?

 The most important piece of information the other party can have about you  Not a good way to demonstrate trust or “good- faith” bargaining  Not a good defensive tactic

Distributive Negotiations FAQs

 Should I lie about my reservation point?

 Lying is unethical (and often illegal)  Lying does not make strategic sense  Lying hurts your reputation

Creating a Fair Agreement

 Fairness is in the eye of the beholder

 Multiple fairness norms

 Equality  Equity  Need

 Judgments of fairness often based on social

comparisons

Wisely Dividing the Surplus

 Be consistent across time and setting

 Keep it simple

 Make it clear

 Be able to justify it to others

 Seek consensus if others are involved

 Make it satisfying to both parties