Negotiation Tactics

Sky Needle due July 9

New Car due July 8 – Only submit results electronically.

For any negotiation there are two things you want to do. Divide the pie into various slices. This is the distributive element of the negotiation. Second, use creative ideas to expand the pie. This is the integrative element of the negotiation. You want to use this with the distributive, but it should generally be the priority first.

There need to be multiple interests in order to expand the pie. In buying the condo there was only one interest: price.

The first point you want to look at is your aspiration. Aspire high and reach for higher numbers. Never set your aspiration based on your batna. The other important point you want to look at is your target. It’s like your aspiration but it’s based on your lucky day and a rational world. The third is your reservation point. Your reservation point is the lowest or highest point you’re willing to go to before your batna. You use your batna to calculate what your reservation point is.

The area between the two parties’ reservation point is the zone of potential (or possible) agreement (zopa). This is the area for which both parties can reach an agreement. On one side is the buyer’s surplus and the other side is the seller’s surplus. You want to be the side that has the higher surplus, but you don’t want the other party to feel ripped off. When there is a real zopa, then that is a positive bargaining zone.

Ways to get bigger piece of the pie

• Increase your batna
• Never fall in love and always develop options
• Put down the first offer if you can (anchoring) so it sets the tone for the negotiation.
• Never give a range.

Using digits to anchor is called digital or numeric anchoring.

Counter-anchoring is you put down the same number you were going to put down anyways, regardless of what the other party says.

Fairness Norms

• Equity based: This is where everyone pays the amount they ordered.
• Equality based: Everyone pays the same amount.
• Need based: Distributing based on the parties’ needs.

Measure concessions- Always get a counteroffer. Never give something without getting something in return.

Reciprocity – You want to go back and forth. The other party will feel better if they have to work for what they want.

There are three levels to integrative negotiation:

1. Better than your batna.
2. Better than better than your batna.
3. Pareto optimal – Nobody can expand the pie any further. It’s been expanded the maximum amount possible. Anything else would be further distributive.

When you compromise in a negotiation it doesn’t help you expand the pie because usually its where one party’s interests. Parties also compromise where neither party is happy. Never compromise just to compromise.

For simultaneous multiple offers, you put together no more than 3 offers together as a package and present it to the other party.