Strategy and Tactics of Distributive Bargaining - PowerPoint by hcj


									Strategy and Tactics of
Distributive Bargaining
    Real Estate Transaction

ä   Basic elements of a distributive bargaining
    (“DB”) situation:
    ä   Win-lose, competitive, or distributive nature
    ä   Strategies emphasize how to increase one’s
        share of the fixed “pie”
    ä   Information is given and sought for strategic
        advantage only
ä   Objectionable? Maybe. Avoidable? No!
    Distributive Bargaining:
    Bargaining Range and Key Points
ä   Target points (goals)
ä   Resistance points (aka reservation points)
    RPs are most important!
ä   Opening points (initial offers, demands or
ä   Bargaining range, settlement range, or zone
    of potential agreement is defined by RPs,
    and may be positive or negative
     Distributive Bargaining Concepts
ä   Role of alternatives (i.e., BATNA)
     ä Parties usually have option of failing to agree
     ä Those options or alternatives strongly influence RPs,
       may define them
ä   Settlement point
     ä Each side wants to claim as much of bargaining range
       as possible, i.e. to claim the “surplus” beyond its RP
     ä Parties must believe they got the best deal possible, or
       at least a “satisficing” deal; else they seek revenge or
       back out
    Distributive Bargaining Concepts
ä   Bargaining Mix -- what issues?
    ä   Single issue: rare, the exception
    ä   Most negotiations involve packages or bundles
        of positions on a number of issues, making
        trade-offs possible
    ä   Single issues good for illustrating basic
        concepts, theory, but note that this is an
        abstraction, atypical
    DB: Fundamental Strategies

ä   Four fundamental strategies
    ä   Trying to claim as much of the bargaining
        range (or surplus) for one’s self as possible
    ä   Persuading opponent to change RP, thereby
        shifting the settlement range in your favor
    ä   If no positive settlement range initially,
        persuade opponent to change
    ä   Persuade opponent that the settlement offered is
        the best for them; best they can do
    DB: Discovering Opponent’s RP

ä   How low will they go? (Or how high?)
ä   Communication is complex: Recall
    dilemmas noted earlier re:
    ä   Honesty
    ä   Trust
    ä   Etc.
ä   Each side wants to give, conceal, and get
    information, and the other side knows it
    DB: Changing Their RP

ä   Three key factors
    ä   Value they attach to particular outcome
    ä   Costs for them of delay or difficulty in negots.
    ä   Costs for them of aborting negotiations (failing
        to agree)
ä   Also, must address their understanding of
    your situation, perception of what’s
    possible, and thus the value they assign to
     DB: Changing Their RP (contd)

ä   Four general propositions (assume you’re buyer):
    ä   Their RP varies directly with their perception of
        your cost of delay or aborting negots.
    ä   Their RP varies inversely with their cost of
        delay or aborting negots.
    ä   Their RP varies directly with the value they
        attach to the outcome
    ä   Their RP varies inversely with the value you
        attach to an outcome
    Tactical Tasks in DB

ä   Task 1: Assess their outcome values
    (utilities) and costs of aborting negotiations
    ä   Indirect assessment: Try to determine the
        information they used to set RPs and targets,
        and how they interpret it
    ä   Direct assessment: Not easy given dilemmas,
        but sometimes they’ll be clear about their
        outcome values and costs (near a deadline?),
        and their conduct may provide clues
    Tactical Tasks in DB (contd)

ä   Task 2: Manage Their Impression
    ä   Screening: Stressed in early stages to gain info on their views;
        representation more important later (silence is golden; invest in
          ä Concealment is most general tactic, may involve use of
            “stooges” who can’t reveal info, calculated incompetence, or
            spokesperson control
          ä Alt strategy: “Snow job” -- bury them in info

    ä   Direct actions to alter impressions
          ä Selective presentation

          ä Logical argument to show you discount an outcome

          ä Emotional reactions

          ä Amount of attention, scrutiny, stress or clarification
    Tactical Tasks in DB (contd)

ä   Task 3: Modify Their Perceptions
    ä   Interpret outcomes: Point out why their
        favored solution is not so good for them after
    ä   Concealment: Allowing their misperception to
        continue rather than attempting to correct it
    Tactical Tasks in DB (contd)

ä   Task 4: Manipulate Costs of Delay or
    Termination (Aborting Negotiations)
    ä   Disruptive action: Increase their costs of
        failing to agree
    ä   Ally with outsiders who can affect outcomes
        (e.g., university depts and accrediting groups)
    ä   Scheduling of negotiations; power may vary
        with timing (e.g., seasonal industry), work it to
        your advantage
     DB Positions and Their Roles
ä   Opening offer: Extremes give room to maneuver, signal
    needs for their concessions, but also risk easy dismissal
    and can stifle cooperation
ä   Opening stance should be consistent with opening offer;
    expect reciprocity
ä   Initial concessions convey symbolic messages (e.g.,
    flexibility or firmness)
ä   Role of concessions: Expected, and explicit links to
    previous concessions are common
ä   Patterns and timing of concessions send signals
ä   Final offer: Can be conveyed explicitly as such or by
    substantial concession
    DB: The Role of Commitment

ä   Signals intent, firmness; exerts pressure
     ä “I can’t move, so you must”
     ä Can involve promises; ongoing credibility requires they
        be kept (but see next point!)
ä   Plan a way out: sometimes commitments must be
ä   Help them abandon commitments when it’s advantageous
    for you to have them move
ä   General rule: You want to appear committed and keep
    them flexible
    DB: Establishing Commitment

ä   Public pronouncements (betting your
ä   Linking with allies (e.g., overtly contacting
    an alternative partner)
ä   Increase prominence of demands through
    formality, repetition, emotional display, etc.
ä   Reinforce threats or promises, possibly act
    to indicate preparation to implement them
    DB: Preventing Their Premature
    Commitment (To Outcomes You Oppose)
ä   Ignore it
ä   Downplay its significance and firmness
    ä   Humor
    ä   Changing the subject
    ä   “Flinch”
    ä   Don’t call attention to it, don’t ask about it
    DB: Finding A Way Out
    (Abandoning Prior Commitments)
ä   New information (had I known ...)
ä   External forces
    ä   Public opinion
    ä   Pressure from authorities
    ä   Broader interests (the public good, peace, etc.)
ä   Reinterpretting (e.g., what was seen as an
    insignificant concession by them takes on
    new significance)
    Closing The Deal -- Tactics

ä   Provide alternatives -- let them pick
ä   Assume the close -- “Could I have your
    name and address for the forms … ?”
ä   Split the (unresolved) difference
ä   Exploding or fused offers -- “This offer
    expires, you must act now!”
ä   Sweeteners -- “And I’ll throw in new deluxe
    DB: Hardball Tactics
    (aka Dirty Tricks)
ä   General nature: Coercive, exploiting fears and anxieties.
    Many consider some or all unethical. Also, they’re
    dangerous! Can backfire. Not recommended.
ä   Some specific examples
     ä Good guy/bad guy
     ä Highball/lowball
     ä Bogey or decoy
     ä The nibble or afterbite
     ä Chicken
     ä Intimidation or aggressive behavior
     ä Lying, deliberate errors, bluffing, etc.
     DB: Dealing With Hardball Tactics
ä   General issues
    ä   Important to recognize them and make a
        strategic response. Don’t let them work.
    ä   Optimal response depends on BATNA,
        timeframe for relationship, among others
ä   Some specific options
    ä   Ignore them
    ä   Discuss them
    ä   Respond in kind
    ä   Co-opt the other party

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