Strategy and Tactics of Distributive Bargaining

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					Strategy and Tactics of
Distributive Bargaining
    Real Estate Transaction

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

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

 How low will they go? (Or how high?)
 Communication is complex: Recall
  dilemmas noted earlier re:
     Honesty
     Trust
     Etc.

   Each side wants to give, conceal, and get
    information, and the other side knows it
    DB: Changing Their RP

   Three key factors
     Value  they attach to particular outcome
     Costs for them of delay or difficulty in negots.
     Costs for them of aborting negotiations (failing
      to agree)
   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)

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

   Task 1: Assess their outcome values
    (utilities) and costs of aborting negotiations
     Indirectassessment: Try to determine the
      information they used to set RPs and targets,
      and how they interpret it
     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)

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

       Direct actions to alter impressions
           Selective presentation

           Logical argument to show you discount an outcome

           Emotional reactions

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

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

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

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

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

   Reinterpretting (e.g., what was seen as an
    insignificant concession by them takes on
    new significance)
    Closing The Deal -- Tactics

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