how to engage in distributive bargaining

How to engage in Distributive Bargaining

• http://youtu.be/HBSsbWVZzto

Definition of distributive bargaining Contrast with integrative

Why use it Terms used in Distributive bargaining

Strategies Tactical Tasks Positions Commitment Closing

Agenda

Definition of Distributive Bargaining Limited & fixed amount of resources Goal conflict

Each maximizes getting share of resources available to oneself

No focus on relationship Informational context

Each provides very little information while trying to extract the most from the other

Why learn about Distributive Bargaining?

Some situations demand it Most people use it Can be useful at the ‘end-stage’ of an integrative

bargaining situation Creating issues, creating value, claiming value

When to use Distributive Bargaining?

Single issue e.g., this session’s exercise

Relationship is not important

Terms used in a Distributive Bargaining Situation

• Target point• Resistance point• Initial offer• Bargaining range

• Zone of potential agreement (ZOPA) or settlement range

– Implications of Positive & negative bargaining range• Best Alternative to Negotiated Agreement• Settlement point

• http://youtu.be/5fmY3JV6iNI (the basics of distributive bargaining)

QUANTITATIVE STRUCTURE OF THE NEGOTIATION

ZOPA = Zone of Potential Agreement.

Buyer’s TargetBuyer’s Resistance Price

Seller’s Resistance Point Seller’s Target

ZOPA

5 10 15 20 25 30 35

Seller’s Initial Offer

Buyer’s Initial Offer

• On the basis of your role, and guessing things about the other role’s write out the following for each role on handout• Target point• Resistance point• Opening offer• Best Alternative to Negotiated Agreement

Students write…..

Plan your side & guess other party’s side

Target Point

Opening Offer

Resistance Point

BATNA

Your side

Other party’s side

• Based on your plan, write out the following for the upcoming negotiation on a line graph• Target point• Resistance point• Opening offer• Bargaining range

• Zone of potential agreement (ZOPA) or settlement range

• Best Alternative to Negotiated Agreement• Settlement point

Students write…..

Plan/Guess ZOPA & Settlement Points

• Strategy– have a future long term relationship with the

other party – How much and what kind of information you

will share which will guide tactics of conceal vs. reveal

• Tactics– Short-term, dynamic– Specific behaviors

• types of questions used, listening behaviors, brainstorming options for mutual gain

Strategy vs. Tactics

•Push for settlement near other’s resistance point•Make extreme offers and small concessions

•Convince other to change his/her resistance point•Increase bargaining range

•Create a positive settlement range•Convince other it was the best possible deal

•Not that it is all they can get, or they are incapable of getting anymore, or they are losing

Strategies used in Distributive Bargaining

Four Tactical Tasks in Distributive Bargaining

1. Assess Other Party’s resistance point, target point, and costs for stopping Negotiation

2. Manage Other’s Impressions of your target point, your resistance point and the cost of stopping negotiation

3. Modify Other’s Perceptions

4. Manipulate Actual Costs of Delay or Termination

http://youtu.be/fJjdpM77qnA (key points to remember when negotiating with a car salesman)

Other’s party’s lower value of a particular issue

Other’s party’s perception of how much you value issue

Other’s vs. your cost to delaying/stopping negotiations

1st Tactic: Assess other party’s resistance point

Other party’s resistance point

+ +/-

Factors affecting other party’s resistance point

+/-

So ask and give information appropriately!

Steps in Distributive Bargaining

Concessions

Opening Stance

Final Offer

First Offer

First Offer Anchoring Final outcome of First Offer maker

How First Offers Work

First Offer Anchoring Final Outcome of First Offer maker

Other Party’s Focus on own target point

Other party’s focus on first offer maker’s resistance point

How to mitigate the effect of First Offers

• First Offers (FO)• Creates advantage to offer maker

• Exaggerated FO get higher settlements– Creates room for negotiation– Meta-messages to other party

» (long way to go, needs to make more concessions, leads other to think they mis-perceived resistance point)

– disadvantages=can be rejected, conveys attitude of toughness and breeds retailiation

• Those with better BATNA make first offer

• Opening Stance– What you say…with your offer– Competitive vs. moderate

• Results in other party to respond in kind– Should be consistent with first offer or it

could be confusing

• Initial Concessions– Initial Offer and counteroffer=bargaining

range• Or reject initial offer

– Symbolic messages in initial concessions– Packet of opening offer, opening stance, initial

concessions display firm vs flexible stance• Firmness creates a climate of negotiation that is either

reciprocated, or shortens negotiations

• Concessions– Progression of Decreasing vs. increasing sizes of

concessions and reciprocation • Across issues = logrolling in integrative bargaining

– Size of concession & occurrence in negotiation sequence

• Signals resistance point, target point, interpret ratios of concessions

– Try out different packages, sweeten the end• Not all issues are worth the same to both negotiators =

integrative bargaining skill

• Final Offers• Statement vs. using concession to convey

‘final offer’• Problem If other party does not recognize

final offer ..• May lead to negative feelings

– Can make the last concession more substantial to signal final offer stage…

• http://www.youtube.com/watch?v=4XizDMfgVjM (Jack failed to negotiate well with his nanny on her salary)

• http://chubbytv.info/30-rock/season/5/episode/15• 3:45-5:12, 7:08-8:10