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Negotiation
Spring 2011
Course convenors:
Ivar BredesenRobert Hartnet
Spring 2011
Course convenors:
Ivar BredesenRobert Hartnet
Negotiationhttp://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
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Negotiation?
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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
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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
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Readings: Negotiation
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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
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Behavioural negotiation
There are many ways to study negotiationFisher and Ury: Principled Negotiations
Karass: Ploys
Kennedy: Behavioural (process) model
Negotiation is a lot more than ploys and tactics
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What would you do?
You have been very busy at work lately, and this is the last day before your annual holidayYour 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
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Alternative methods of making decicions
Say ”No”
Persuasion
Problem-solve
Chance
Negotiate
Litigation
Arbitrate
Coercion
Postpone
Instruct
Give in
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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
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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
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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
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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
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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
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What do you think?
Agree Disagree
1Negotiators should not reveal their true feelings in case their opponents take advantage
2A magrinally acceptable deal is better than no dealat all
3If an opponent gives me an opportunity to takeadvantage discreetly, that`s their problem
4I will renegotiate profitable deals if the othernegotiator say they are in difficulties
5I look after my own interests and leaveopponents to look after theirs
6It is generally beneficial to be open aboutone`s true circumstances
7 I am worried about rejection when negotiating
8If opponents are too soft and can`t look afterthemselves, that`s their lookout
9 A good cause is more worthy than power
10When opponents buckle under pressure Ishould push harder
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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 partyProtects oneself - ”I defect not because I want to,
but because I must”
Has dishonest agenda and often seek zero-sum outcomes
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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”
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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
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Blue behaviour
Blue – wishes to be part of a teamExtreme blue - naive, are often taken
advantage of
Within negotiations – purple behaviour is often recommended
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Prisoners dilemma
Prisoner A
Confess Deny
Confess
Deny
Prisoner B
-5, -5 -1, -10
-2, -2-10, -1
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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
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Distributive Bargaining
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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
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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
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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
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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
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Negotiating range
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Settlement range
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Disclosing entry price can be dangerous
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The Run-down bar Negotiation
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The Run-down bar Negotiation
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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
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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
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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
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