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Slide 1 Rational Bargaining What is meant by rational bargaining John Nash on bargaining Fisher and Ury – principled negotiation.

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Presentation on theme: "Slide 1 Rational Bargaining What is meant by rational bargaining John Nash on bargaining Fisher and Ury – principled negotiation."— Presentation transcript:

1 Slide 1 Rational Bargaining What is meant by rational bargaining John Nash on bargaining Fisher and Ury – principled negotiation

2 Slide 2 Bill and Jack

3 Slide 3 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

4 Slide 4 Bill and Jack

5 Slide 5 Bill and Jack in Negotek

6 Slide 6 Bill and Jack both gain

7 Slide 7 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)

8 Slide 8 Benefits of bargaining

9 Slide 9 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

10 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 Slide 10

11 Fisher and Ury – Getting to yes Slide 11

12 Slide 12 Principled solution

13 Slide 13 Fisher and Ury`s prescriptions

14 Slide 14 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

15 Slide 15 Negotiators as mediators

16 Slide 16 Streetwise Manipulation

17 Slide 17 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

18 Slide 18 Chester L. Karass

19 Slide 19

20 Slide 20 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.

21 Slide 21 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

22 Slide 22 Power and outcome

23 Slide 23 Who has the power?

24 Slide 24 Ploys All ploys belong to one of three main types Dominance Shaping Closing

25 Slide 25 Dominance ploys Negotiators may seek to dominate in the opening phase of negotiation Pre-conditions This is non-negotiable! Rigging the agenda

26 Slide 26 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”

27 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. Slide 27

28 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. Slide 28

29 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. Slide 29

30 Slide 30 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

31 Slide 31 Closing ploys Quivering Quill Yes, but Now or Never Take It or Leave It Split the Difference

32 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. Slide 32

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