Rational Bargaining

 What is meant by rational bargaining  John Nash on bargaining  Fisher and Ury – principled negotiation

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Bill and Jack

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John Nash

 Nash does not look at how you arrive at a soulution – the focus is the content of the solution  Nash assumptions  Rational bargainers who can compare each others desires for various things  Bargainers who have equal bargaining skills  Bargainers have full knowledge of tastes and preferences of the other

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Bill and Jack

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Bill and Jack in Negotek

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Bill and Jack both gain

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John Nash

 Nash`assumptions may not always hold  Zero-sum or non-cooperative behaviour  Non-sero sum or co-operative behaviour  These match our ”Red” and ”Blue” negotiation styles  Distributive bargainers (claimers)  Integrative bargainers (creators)

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Benefits of bargaining

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Are people rational?

 Kennedy ”The main problem with assuming rationality is that it is at variance with how people behave”  Irrational escalation  Fixed pies  Anchoring  Referent behaviour  Fallacy of prominence  Overconfidence

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Are people rational?

 “Brilliant . . . It is impossible to exaggerate the importance of Daniel Kahneman’s contribution to the understanding of the way we think and choose. He stands among the giants, a weaver of the threads of Charles Darwin, Adam Smith and Sigmund Freud. Arguably the most important psychologist in history, Kahneman has reshaped cognitive psychology, the analysis of rationality and reason, the understanding of risk and the study of happiness and well-being . . . A magisterial work, stunning in its ambition, infused with knowledge, laced with wisdom, informed by modesty and deeply humane. If you can read only one book this year, read this one.”— Janice Gross Stein,

The Globe and Mail

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Fisher and Ury – Getting to yes

http://www.williamury.com/books/getting-to-yes Slide 11

Principled solution

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Fisher and Ury`s prescriptions

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BATNA

 Best Alternative to a Negotiated Agreement  On which basis will you agree to or walk away from a bargain  Norwegian – BATFOL – Beste Alternativ Til en FOrhandlings Løsning

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Negotiators as mediators

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Streetwise Manipulation

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Streetwise Manipulation

 ”A ploy recognised is a ploy disarmed”  You need to know the ploys in order to understand when they are used against you  Ploys may affect power, which again affect what outcome you expect

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Chester L. Karass

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Chester L. Karass

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First Seminar on Negotiating Changed My Life…

 When you are about to say yes, say no one more time.  Learn not to flinch.  Leave less on the table and leave others satisfied.  Start out with low, opening offer.  Encourage the other party to open up first.  The use of time is important.

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First Seminar on Negotiating Changed My Life…

 Make concession on a minor issue.  Take time to answer questions.  Confusion can exist between need and want.  Negotiate on small items.  Learn when to leave

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Power and outcome

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Who has the power?

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Ploys

 All ploys belong to one of three main types  Dominance  Shaping  Closing

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Dominance ploys

 Negotiators may seek to dominate in the opening phase of negotiation  Pre-conditions  This is non-negotiable!

 Rigging the agenda

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Shaping ploys

 Often used in the middle of negotiations to affect what one party may feel is possible  This is the ”final offer”  Fait-accompli  Tough Guy/Soft Guy – ”almost everybody sound in body and mind knows of it, so I wonder why it still works”  The ”Bogey”

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Karass Bogey

 Let's say you want to landscape and fence your backyard in an unusual way. The job is reasonably complex due to the layout. You get a bid of $25,000 from a local contractor. It is neither the lowest nor highest bid, but you decide it is the most reliable and responsive —you'd like to do business with them.

 The trouble is you only want to spend $18,000 to $20,000 for the project. So you try a Bogey. You tell the contractor that you really love their proposal, but I only have $18,000 to spend. The contractor will generally respond to the $18,000 Bogey by either changing their proposal or exploring what alternatives are available.

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Karass Bogey

 The U.S. Government uses it when they tell a defense contractor to take a closer look at their million-dollar proposal because the government budget is only $700,000.

 A school district uses it when it tells its architect to redesign the high-school building to fit the $22 million limitation imposed by the bond financing.

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Karass Bogey

 A project manager uses it when she tells her technical services department that the implementation schedule only allows twelve man days for their portion of the project.

 An industrial buyer uses it when showing the salesperson that the amount budgeted by the accounting department is less than what the seller bid.

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Shaping ploys, continued

 The ”Krunch” – you have to do better than that  The ”Nibble” – if you can`t get a dinner, get a sandwich  Salami ploy  Sell cheap, get famous  Add-on  Limited authority

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Closing ploys

 Quivering Quill  Yes, but  Now or Never  Take It or Leave It  Split the Difference

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Karass – split the difference

 I know buyers who use the spilt approach. They make a low starting offer, raise it only slightly, and then say, "Okay, let's split the difference." These buyers know it's hard for a salesperson to say no to such a reasonable request. The salesperson gets sucked into the split and then discovers they give away information to justify why a simple split is not equitable and use this as an opportunity to explore other options.

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