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CHAPTER TWO

CHAPTER TWO. Strategy and Tactics of Distributive Bargaining. (Slicing the Pie). The Distributive Bargaining Situation. Goals of one party are in fundamental, direct conflict to another party

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CHAPTER TWO

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  1. CHAPTER TWO Strategy and Tactics of Distributive Bargaining (Slicing the Pie)

  2. The Distributive Bargaining Situation • Goals of one party are in fundamental, direct conflict to another party • Resources are fixed and limited • Maximizing one’s own share of resources is the goal

  3. The Distributive Bargaining Situation Preparation—set a • Target point, aspiration point • Walkaway, resistance point • Asking price, initial offer

  4. The Distributive Bargaining Situation Party A - Seller Walkaway Point Target Point Asking Price Initial Offer Target Point Walkaway Point Party B - Buyer

  5. The Role of Alternatives to a Negotiated Agreement • Alternatives give the negotiator power to walk away from the negotiation • If alternatives are attractive, negotiators can: • Set their goals higher • Make fewer concessions • If there are no attractive alternatives: • Negotiators have much less bargaining power

  6. The Distributive Bargaining Situation Party A - Seller Walkaway Point Target Point Asking Price Alternative Alternative Initial Offer Target Point Walkaway Point Party B - Buyer

  7. Seller’s Bargaining Range Negative Bargaining Zone Buyer’s Bargaining Range $5 $10 $15 $20 ST, Seller’s Target Point SR, Seller’s Walkaway BR, Buyer’s Walkaway BT, Buyer’s Target Point Negative Bargaining Zone

  8. The Most Commonly Asked Questions • Should I reveal my reservation point? • Should I lie about my reservation point? • Should I try to manipulate the other party’s reservation point? • Should I make a “final offer” or commit to a position?

  9. Fundamental Strategies • Push for settlement near opponent’s resistance point • Get the other party to change their resistance point • If settlement range is negative, either: • Get the other side to change their resistance point • Modify your own resistance point • Convince the other party that the settlement is the best possible

  10. Keys to the Strategies The keys to implementing any of the four strategies are: • Discovering the other party’s resistance point • Influencing the other party’s resistance point

  11. Tactical Tasks of Negotiators • Assess outcome values and the costs of termination for the other party • Manage the other party’s impressions • Modify the other party’s perceptions • Manipulate the actual costs of delay or termination

  12. Assess Outcome Values and the Costs of Termination for the Other Party • Indirectly • Determine information opponent used to set: • Target • Resistance points • Directly • Opponent reveals the information

  13. Manage the Other Party’s Impressions • Screen your behavior: • Say and do as little as possible • Direct action to alter impressions • Present facts that enhance one’s position

  14. Modify the Other Party’s Perceptions • Make outcomes appear less attractive • Make the cost of obtaining goals appear higher • Make demands and positions appear more or less attractive to the other party –whichever suits your needs

  15. Manipulate the Actual Costs of Delay or Termination • Plan disruptive action • Raise the costs of delay to the other party • Form an alliance with outsiders • Involve (or threaten to involve) other parties who can influence the outcome in your favor • Schedule manipulations • One party is usually more vulnerable to delaying than the other

  16. Positions Taken During Negotiations • Opening offer • Where will you start? • Opening stance • What is your attitude? • Competitive? Moderate? • Initial concessions • Should any be made? If so, how large?

  17. Positions Taken During Negotiations • The role of concessions • Without them, there is either capitulation or deadlock • Patterns of concession making • The pattern contains valuable information • Final offer (making a commitment) • “This is all I can do”

  18. Thompson’s Pie-Slicing Strategies (I) • Strategy 1: Assess your BATNA and improve it • Strategy 2: Determine your reservation point, but do not reveal it • Strategy 3: Research the other party’s BATNA and estimate their reservation point • Strategy 4: Set high aspirations (be realistic, but optimistic) • Strategy 5: Make the first offer (if you are prepared) • Strategy 6: Immediately reanchor if the other party opens first

  19. Thompson’s Pie-Slicing Strategies (II) • Strategy 7: Plan your concessions • Pattern of concessions • Magnitude of concessions (GRIT model) • Timing of concessions • Strategy 8: Use an objective-appearing rationale to support your offers • Strategy 9: Appeal to norms of fairness • Strategy 10: Do not fall for the “even split” ploy

  20. Closing the Deal • Provide alternatives (2 or 3 packages) • Assume the close • Split the difference • Exploding offers • Deal sweeteners

  21. Dealing with Typical Hardball Tactics • Four main options: • Ignore them • Discuss them • Respond in kind • Co-opt the other party (befriend them)

  22. Typical Hardball Tactics • Good Cop/Bad Cop • Lowball/Highball • Bogey (playing up an issue of little importance) • The Nibble (asking for a number of small concessions to)

  23. Typical Hardball Tactics • Chicken • Intimidation • Aggressive Behavior • Snow Job (overwhelm the other party with information)

  24. Summary Negotiators need to: • Set a clear target and resistance points • Understand and work to improve their BATNA • Start with good opening offer • Make appropriate concessions • Manage the commitment process

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