1. Negotiation Spring 2011 Course convenors: Ivar Bredesen Robert Hartnet Spring 2011 Course convenors: Ivar Bredesen Robert Hartnet

2. Negotiation http://home.hio.no/~ivar-br/fag/Negotiation/Negotiaton.htm 5 ECTS 7 lectures 11 January – 22 February 2 full days of practical training 3 and 4 March 4 hour closed book exam 22 March Exam format: Case study + 3 essay questions Slide 2

3. Slide 3 Negotiation?

4. Slide 4 Course objective The course aims to provide a thorough grounding in the science and practice of negotiation. Various academic disciplines (economics, psychology, sociology, politics, anthropology and mathematics) have researched negotiation from their particular standpoints and much of this material forms the basis for the scientific analysis of negotiation

5. Slide 5 Course contents The course in negotiation will address: What is negotiation? Preparation for negotiation Debate in negotiation Prososals and bargaining Rational bargaining Ploys and manipulation techniques

6. Slide 6 Readings: Negotiation

7. Slide 7 Course structure The textbooks are international best selling books on negotiation The texts give examples and theories and these will be further developed in the case studies and essay questions

8. Slide 8 Behavioural negotiation There are many ways to study negotiation Fisher and Ury: Principled Negotiations Karass: Ploys Kennedy: Behavioural (process) model Negotiation is a lot more than ploys and tactics

9. Slide 9 What would you do? You have been very busy at work lately, and this is the last day before your annual holiday Your family has already gone ahead to the villa you have rented Your taxi to the airport is waiting outside Your boss comes in and asks you to work on some customer account over the weekend

10. Slide 10 Alternative methods of making decicions Say ”No” Persuasion Problem-solve Chance Negotiate Litigation Arbitrate Coercion Postpone Instruct Give in

11. Slide 11 Adam Smith (Book 1, ch. 2) Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them

12. Slide 12 What is negotiation? Give me some of what I want and I will give you some of what you want The process by which we search for the terms to obtain what we want from somebody who wants something from us Negotiation is an explicit voluntary traded exchange between people who want something from each other

13. Slide 13 Negotiation Negotiation is one of several means available to managers to assist in the making of decisions. It is neither superior nor inferior to other forms of decision- making - it is appropriate in some circumstances but not in others

14. Slide 14 When do we negotiate? We negotiate: When we need someone's consent When the time and effort of negotiating are justified by the potential outcome When the outcome is uncertain

15. Slide 15 The four phases Negotiations involve a four stage process: Preparation – what do we want? Debate – what do they want? Propose – what wants might we trade? Bargain – what wants will we trade

16. Slide 16 What do you think?

17. Slide 17 Red and blue behaviour Everyone will accept that an outcome will depend on both our own activity and the activity of others Is the opponent ”red” or ”blue” ? Red – exploits the other party Protects oneself - ”I defect not because I want to, but because I must” Has dishonest agenda and often seek zero-sum outcomes

18. Slide 18 Red assumptions ”In a successful negotiation, both parties gain – but one gains more than the other.” ”We recognise that, far from being honest, negotiation is a web of even more delicate lies. A skilled negotiatior will appear friendly if this is the role he considers to be most effective, but will never sacrifice profit for friendship in his business dealings”

19. Slide 19 Red attitudes Be aggressively competitive and non- cooperative Dominate your opponents Seek always to win All deals are ”one-offs” Use ploys and tricks Bluff and coerce Exploit the submissive

20. Slide 20 Blue behaviour Blue – wishes to be part of a team Extreme blue - naive, are often taken advantage of Within negotiations – purple behaviour is often recommended

21. Slide 21 Prisoners dilemma Prisoner A ConfessDeny Confess Deny Prisoner B -5, -5-1, -10 -2, -2-10, -1

22. Slide 22 Blue and blue Only about 8 % av players in negotiation games open with blue Blue is only selected if the other party opens with blue If the other player selects red, you will respond with red (tit-for-tat) Players need to trust each other before blue/blue behaviour will emerge

23. Slide 23 Distributive Bargaining

24. Slide 24 Single issue negotiation Vital (but probably unavailable) information is how little is John prepared to accept There is no obvious solution to this dilemma Zero sum game – one loses what the other one gains Lose-lose is a possible outcome too and both strive hard to make the other party moving

25. Slide 25 Single issue negotiation In negotiation we start with at least two solutions (yours and mine) to the same problem, and the objective is to end up with only one solution, if we can What is to be the agreed price for the used car? A negotiator opens with an entry price, the price he prefers to get. The gap between the entry prices for each negotiator is called the total negotiating range or the haggling range

26. Slide 26 Negotiating range The negotiating range implies distance and movement ”After 12 hours of talks, we are still a long way apart” Movement from entry prices are of course inevitable. No one opens with his final price

27. Slide 27 Negotiating range There will always be a limit beyond which you do not want to go – this is the exit price The exit price will normally lie somewhere in the negotiating range. Unless exit prices at least meet, there will be no agreement

28. Slide 28 Negotiating range

29. Slide 29 Settlement range

30. Slide 30 Disclosing entry price can be dangerous

31. Slide 31 The Run-down bar Negotiation

32. Slide 32 The Run-down bar Negotiation

33. Slide 33 Negotiators surplus Assume you are willing to sell a property for 150 000 but hope to get 250 000 The difference of 100 000 can be divided between buyer and seller – settlement range

34. Slide 34 Settlement range 115 is the lowest price the seller will accept and 120 is the highest price the buyer is prepared to pay Any price in between can be a settlement price

35. Slide 35 Settlement price Diffence between settlement price and the seller exit price is called sellers surplus, and difference between settlement price and buyers exit price is called buyers surplus. Sum of buyers and sellers surplus is negotiators surplus