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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Fisher and Ury – Getting to yes Slide 10

Principled solution

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Fisher and Ury`s prescriptions Slide 12

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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