Presentation on theme: "Psych 253 Judgments and Decisions Negotiations"— Presentation transcript:
1Psych 253 Judgments and Decisions Negotiations Negotiations and Conflict ResolutionPsych 253 Judgments and Decisions NegotiationsBarbara Mellers1
2TexoilAn independent service station in the Port of Los Angeles is for sale by owners (married couple)Texoil, a large petroleum refining company, is a potential buyer (Texoil representative)Parties have 5 minutes to prepare and 30 minutes to negotiate and discuss Texoil’s possible purchase of the service stationWhen you prepare, think about your BATNA, your reservation price, and your underlying INTERESTS!
3Each Side’s Information Texoil Rep.Station OwnerBATNAReservation PriceInterests
4Each Side’s Information Texoil Rep.Station OwnerBATNAReservation PriceInterests$675,000(Build one)$400,000(BP offer)
5Each Side’s Information Texoil Rep.Station OwnerBATNAReservation PriceInterests$675,000(Build one)$400,000(BP offer)$500,000Why not $675K?Minimart = $100KUpgrades = $??$553,000 ($488,000 after taxes)Boat loan: $230,000Boat ready: $68,000Food, health, clothing: $75,000Boat repairs: $40,000Savings after return: $75,000
6Each Side’s Information Texoil Rep.Station OwnerBATNAReservation PriceInterests$675,000(Build one)$400,000(BP offer)$500,000Why not $675K?Minimart = $100KUpgrades = $??$553,000 ($488,000 after taxes)Boat loan: $230,000Boat ready: $68,000Food, health, clothing: $75,000Boat repairs: $40,000Savings after return: $75,000Time off (2 years)Spouse’s healthSail around the worldSavings / future incomeHealth insurance, food, etc.Good priceGood managersStation Ownership
7Who reached an agreement? What kind of information did you share?What was the key to an agreement?
8Initial Texoil Situation Station Owner’sReservation Price($553,000)Texoil Rep’sReservation Price($500,000)400450500550600650700700BATNAFor Station Owner(or, stay put)Sale Price(in thousands)BATNAFor Texoil Rep
9Sale Price (in thousands) Revised Texoil Situation: If Texoil Representative includes Job Offer Upon ReturnStation Owner’sReservation Price($467,000)Texoil Rep’sReservation Price($500,000)460470480490500510520530Sale Price (in thousands)
11Distributive Integrative Bargaining Bargaining One issue Many issuesWin-Lose Win-WinOutcome Process and outcomeMax share of pie Max size and share of pieOne time Repeated timesOne position Many optionsKeep interests hidden Share interestsKeep information hidden Share informationCompetitive Cooperative/CompetitivePosition-based Interest-based
12Distributive Integrative Bargaining Bargaining TACTICSDistributive Integrative Bargaining BargainingAnalyze own & other’s interestsAnalyze own & other’s prioritiesPrepare multi-issue proposalsThink creatively about shared interestsDefine your BATNADefine your reservation priceDefine your target levelPrepare objective rationales
13Anchor with first offer Discuss single issue Make bi-lateral, not Open highAnchor with first offerDiscuss single issueMake bi-lateral, notunilateral concessionsPersuade through objective rationaleCooperateBuild trustMake package dealsMake multiple offers simultaneouslyAsk for and share info about interests & prioritiesIn the negotiation itself, again these are very different types of bargaining. For distributive….for integrative…..Now. These seem like two totally different types of bargaining – distributive and integrative bargaining – that are almost opposed to each other. So the question is, which is correct? Is it better to be a distributive or an integrative bargainer?You should do both. In every negotiation situation, you should be simultaneously trying to enlarge the pie and to get the biggest slice of it.You should prepare for both of these bargaining strategies, and you should be constantly trying to create value while you try to claim value.You want to open high, anchor, make persuasive arguments for your positions, while at the same time you try to establish trust, cooperation, asking for and sharing information about interests.It’s very possible to be both an integrative and distributive bargainer – to try to maximize both parties gains, but also to try to maximize your own gain.
14Why did impasses occur?Negotiators may have: Escalated commitment to positions Tried to win over all else Believed that the pie was fixed (other party’s interests are opposite yours) Had positive illusions and unrealistic aspirations Had negative views of opponent
15Integrative Negotiation Separate people from problemShould you be a hard or soft negotiator?Focus on interests, not positionsGenerate multiple possibilitiesBase results on objective standards
16Advantages of Integrative Agreements Improve outcomesCreate more stable agreementsImprove implementationStrengthen the relationship
17But..The non-separability of integrative and distributive negotiations“Value that has been created must be claimed”Tactics that claim value can impede its creationPersuading, withholding informationApproaches to creating value are vulnerable to claiming tacticsDisclosing interests, priorities
18The Prisoner’s Dilemma Your PartnerNot confessConfess2 yrs0 yrsYou10 yrs5 yrs
19The Negotiator's Dilemma Your CounterpartCreateClaimGoodGreatYouTerribleMediocre
20Resolving the DilemmaPrepare for integrative and distributive opportunitiesAnalyze own & other’s interests; avoid fixed-pie perceptionKnow your BATNA, Res Price, objective argumentsBalance cooperation and competitionBuild trust: don’t jump in trusting immediately, but be open to a trusting interactionAsk for and share info about interests & priorities, but watch out for unilateral information exchange