1. Preparation: What to Do Before Negotiation
CHAPTER 2
2-1
Preparation: What to Do Before Negotiation

2. The Fixed-Pie Perception
CHAPTER 2
2-2
The Fixed-Pie Perception
Most negotiators usually take one of three suboptimal approaches when preparing for negotiation:
Resignation to capitulating to the other side (soft bargaining)
Preparation for attack (hard bargaining)
Compromise (often regarded to be a win-win negotiation, but in fact, it is not)
Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson Education,
The Mind and Heart of the Negotiator 5/e (Thompson)  Inc. publishing as Prentice Hall

3. Preparation: Self-Assessment (I)
CHAPTER 2
2-3
Preparation: Self-Assessment (I)
What do I want (target or aspiration)?
What is my alternative to reaching agreement in this situation (BATNA)?
Determine your reservation point
Be aware of focal points
Beware of sunk costs
Do not confuse your target point with your reservation point
Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson Education,
The Mind and Heart of the Negotiator 5/e (Thompson)  Inc. publishing as Prentice Hall

4. Preparation: Self-Assessment (II)
CHAPTER 2
2-4
Preparation: Self-Assessment (II)
Identify the issues in the negotiation
Identify the alternatives for each issue
Identify equivalent packages of offers
Assess your risk propensity
Endowment effects
Am I going to live to regret this?
Violations of the sure thing principle
Do I have an appropriate level of confidence?
Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson Education,
The Mind and Heart of the Negotiator 5/e (Thompson)  Inc. publishing as Prentice Hall

5. Developing a Reservation Point
CHAPTER 2
2-5
Developing a Reservation Point
Step 1: Brainstorm Your Alternatives. Imagine that you want to sell your house. Your target point—$275,000. What will you do in the event that you do not get an offer of $275,000? Consider as many alternatives as possible.
Step 2: Evaluate Each Alternative. Order the various alternatives in terms of their relative attractiveness, or value. If an alternative has an uncertain outcome, such as reducing the list price, you should determine the probability that a buyer will make an offer at that price. Suppose that you reduce the list price to $265,000. Based on research, you assess the probability of an offer to be 60%. The best alternative should be selected to represent your BATNA.
Step 3: Attempt to Improve Your BATNA. In this case, you might contact a rental company and develop your rental options, or you may make some improvements that have high return on investment (e.g., new paint). Of course, your most attractive BATNA is to have an offer in hand on your house.
Step 4: Determine Your Reservation Price. The least amount of money you would accept for your home at the present time. You assess the probability of an offer of $250,000 or higher to be 95%. You think there is a 5% chance that you will not get such offer and will rent it. The probabilities always sum to exactly 100%. We have considered all possible events occurring. No alternative is left to chance. You can assess your expected probabilities of selling your house:
Reduce the price of your home to $265, Psale = 60%
Reduce the price of your home to $250, Psale = 35%
Rent the house Prent = 5%
An overall value for each of these “risky” alternatives is assessed by multiplying the value by its probability:
Value of reducing price to $265,000 = $265,000 x 0.6 = $159,000
Value of reducing price to $250,000 = $265,000 x 0.35 = $87,500
Value of renting the house = $100,000 x 0.05 = $5,000
Add all the values of the alternatives to arrive at an overall evaluation:
= 0.6($265,000) ($250,000) ($100,000) = $159,000 + $87,500+ $5,000 = $251,500
Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson Education,
The Mind and Heart of the Negotiator 5/e (Thompson)  Inc. publishing as Prentice Hall

6. Preparation: Assessing the Other Party
CHAPTER 2
2-6
Preparation: Assessing the Other Party
Who are the other parties?
Are the parties monolithic?
Counterparties’ interests and position
Other negotiators’ BATNAs
Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson Education,
The Mind and Heart of the Negotiator 5/e (Thompson)  Inc. publishing as Prentice Hall

7. Preparation: Assessing the Situation (I)
CHAPTER 2
2-7
Preparation: Assessing the Situation (I)
Is the negotiation one-shot, long-term, or repetitive?
Do the negotiations involve scarce resources, ideologies, or both?
Is the negotiation one of necessity or opportunity?
Is the negotiation an exchange or dispute situation?
Are there linkage effects?
Is agreement required?
Is it legal to negotiate?
Is ratification required?
Are there time constraints or other time-related costs?
Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson Education,
The Mind and Heart of the Negotiator 5/e (Thompson)  Inc. publishing as Prentice Hall

8. Preparation: Assessing the Situation (II)
CHAPTER 2
2-8
Preparation: Assessing the Situation (II)
Are contracts official or unofficial?
Where do the negotiations take place?
Are negotiations public or private?
Is third-party intervention a possibility?
What conventions guide the process of negotiation (such as who makes the first offer)?
Do negotiations involve more than one offer?
Do negotiators communicate explicitly or tacitly?
Is there a power differential between parties?
Is precedent important?
Instructor’s Manual with Overheads to accompany Copyright ©2012 Pearson Education,
The Mind and Heart of the Negotiator 5/e (Thompson)  Inc. publishing as Prentice Hall

9. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
CHAPTER 2
2-9
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Copyright ©2012 Pearson Education, Inc.  publishing as Prentice Hall