Distributive Bargaining
1
NEGOTIATION SKILLS
S2, 2012 WEEK 2: DISTRIBUTIVE BARGAINING
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Today’s lecture: Distributive bargaining
• • • • • The basic negotiation strategies Distributive bargaining scenarios Fundamentals of distributive bargaining Tasks to focus on Distributive tactics
• Results from conflict management styles survey
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Choosing a negotiation strategy
• Distributive
• Conflicting goals, fixed pie (“zerosum game”), task is to claim value and maximize personal gains
• Shared goals, expandable pie (“winwin”), task is to create value, maximize joint gains • Both expanding the pie -- meeting needs of all or most parties as much as possible -- while claiming your share
• Integrative
• Mixed-Motive
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Negotiation strategies and value
Pareto Frontier: where one party cannot be better off without the other being worse off
Creating Value
Claiming Value
Shaded Region Represents All Mutually Acceptable Agreements
Value to Party A
5
Typical distributive scenarios
• Haggling in a flea market • Hostile mergers • Decisions over allocation of scarce resources (e.g. budgets) • Border disputes • Water resource allocation
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Distributive bargaining: The Basics
• Elements of distributive negotiation:
• • • • “Fixed pie”; scarce resources Conflicting goals/interests Narrow bargaining mix Uncertainty of future relationship
• Aim is to maximise share
7
Distributive bargaining: Why is it Important?
• All negotiations are potentially distributive
• Many people know only how to bargain distributively • Even integrative negotiations have distributive elements
• Essential to know how to counter distributive tactics
8
Distributive bargaining: First step
• Target point - aspirational • Resistance point – walk-away
• Opening offer – tactical
9
Distributive bargaining: Typical negotiation structure
Seller’s BATNA
Seller’s Resistance Point
Focal Points
Buyer’s BATNA Buyer’s Resistance Point
Better for
NEGOTIATION SKILLS
S2, 2012 WEEK 2: DISTRIBUTIVE BARGAINING
2
Today’s lecture: Distributive bargaining
• • • • • The basic negotiation strategies Distributive bargaining scenarios Fundamentals of distributive bargaining Tasks to focus on Distributive tactics
• Results from conflict management styles survey
3
Choosing a negotiation strategy
• Distributive
• Conflicting goals, fixed pie (“zerosum game”), task is to claim value and maximize personal gains
• Shared goals, expandable pie (“winwin”), task is to create value, maximize joint gains • Both expanding the pie -- meeting needs of all or most parties as much as possible -- while claiming your share
• Integrative
• Mixed-Motive
4
Negotiation strategies and value
Pareto Frontier: where one party cannot be better off without the other being worse off
Creating Value
Claiming Value
Shaded Region Represents All Mutually Acceptable Agreements
Value to Party A
5
Typical distributive scenarios
• Haggling in a flea market • Hostile mergers • Decisions over allocation of scarce resources (e.g. budgets) • Border disputes • Water resource allocation
6
Distributive bargaining: The Basics
• Elements of distributive negotiation:
• • • • “Fixed pie”; scarce resources Conflicting goals/interests Narrow bargaining mix Uncertainty of future relationship
• Aim is to maximise share
7
Distributive bargaining: Why is it Important?
• All negotiations are potentially distributive
• Many people know only how to bargain distributively • Even integrative negotiations have distributive elements
• Essential to know how to counter distributive tactics
8
Distributive bargaining: First step
• Target point - aspirational • Resistance point – walk-away
• Opening offer – tactical
9
Distributive bargaining: Typical negotiation structure
Seller’s BATNA
Seller’s Resistance Point
Focal Points
Buyer’s BATNA Buyer’s Resistance Point
Better for