CHAPTER 2

STRATEGY AND TACTICS OF DISTRIBUTIVE BARGAINING

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DISTRIBUTIVE BARGAINING

Distributive bargaining and tactics are quite useful when a negotiator wants to maximize the value obtained in a single deal, when the relationship with the other party is not important, and when they are at the claiming value stage of negotiations.

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The Distributive Bargaining Situation

Target Point: The point at which a negotiator would like to conclude negotiations-his optimal goal. Sometimes referred to as negotiator's aspiration.

Resistance Point: The price beyond which the negotiator will not go-the most he will pay as a buyer.

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The Distributive Bargaining Situation

Asking price: The initial price set by the seller.

Initial Offer: The first number the buyer will quote to the seller.

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The Buyer’s view of the house negotiation

Megan’sResistancePoint(inferred)

Larry’sInitialOffer(Public)

Larry’sTargetPoint(Private)

Megan’sTargetPoint(Inferred)

Megan’sasking Price(Public)

Larry’sResistancePoint(private)

135000 133000 135000 140000 145000 150000

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ZOPA (Zone of Potential Agreement)

The spread between the resistance points.

In this area the actual bargaining takes place, for anything outside these points will be summarily rejected by one of the two negotiators.

Positive Bargaining Range: When the buyer’s resistance point is above the seller’s.

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ZOPA (Zone of Potential Agreement

Negative Bargaining Point: The seller’s resistance point is above the buyer’s, and the buyer wont pay more than the seller will minimally accept.

Such negotiations are likely to stalemate.They can be resolved if one or both the

parties change their resistance point.

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BATNA

Alternatives are important because they give negotiators the power to walk away from any negotiation when the emerging deal is not very good.

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SETTLEMENT POINT

The fundamental process of distributive bargaining is to reach a settlement within a positive bargaining range.

Each party wants to reach an agreement as close to the other party’s resistance point as possible.

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BARGAINING MIX

The package of issues for negotiation is the bargaining mix.

Each item in the mix has its own starting, target, and resistance point.

Negotiators need to understand what is important to them and to the other party.

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TACTICAL TASKS

Assess the other party’s target, resistance point, and cost of terminating negotiation

1. Indirect Assessment

2. Direct Assessment

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TACTICAL TASKS

Manage the other party’s impression of the negotiator’s target.

1. Screening activities

2. Direct Action to alter impressions

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TACTICAL TASKS

Modify the other party’s perceptions by making outcomes appear less attractive or by making the cost of obtaining them appear higher.

The negotiator may also try to make demands and positions appear more attractive or less unattractive to the other party.

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TACTICAL TASKS

Manipulate the actual costs of Delay or Termination

1. Plan Disruptive Action.

2. Form an alliance with outsiders.

3. Manipulate the scheduling of negotiations

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PSITIONS TAKEN DURING NEGOTIATION

Opening OfferOpening StanceInitial ConcessionsRole of ConcessionsPattern of Concession makingFinal Offer

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OPENING OFFER

It can be exaggerated or modest. Exaggerated Offer is advantageous as

it allows room for movement and acts as a metamessage.

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ADVANTAGES OF EXAGGERATED OPENING OFFER

It may create in the other party’s mind the impression that

1. There is a long way to go before a reasonable settlement will be achieved

2. More concessions than originally intended may have to be made to bridge the difference between the two opening positions

3. The other may have incorrectly estimated his or her resistance point.

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DISADVANTAGES OF EXAGGERATED OPENING OFFER

It may be summarily rejected by the other party.

It communicates an attitude of toughness that may be harmful to long term relationships.

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OPENING STANCE

It is important for negotiators to think carefully about the message that they wish to signal with their opening stance and subsequent concessions because there is a tendency for negotiators to respond “in kind” to distributive tactics in negotiation.

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INITIAL CONCESSIONS

The opening offer might face disapproval from the other party and one has to make concessions.

The first concession conveys a message, a symbolic one, to the other party about how you would proceed.

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ROLE OF CONCESSION

Without concessions negotiations would not exist.

Good distributive bargainers will not start negotiations with an opening offer too close to their own resistance point.

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BOULWARISM

Negotiators resent a take-it-or-leave-it approach: an offer that may have been accepted had it emerged as a result of concession making may be rejected when it is thrown on the table as a fait accompli.

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PATTERN OF CONCESSION MAKING

It contains valuable information but it is not easy to interpret.

When successive concessions get smaller and concession maker’s position gets firmer then the resistance point is being approached.

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HARDBALL TACTICS

Such tactics are to pressure negotiators to do things they would not otherwise do.

They work best against poorly prepared negotiators.

They can also backfire, and there is evidence that very adversarial negotiators are not effective negotiators.