Normative Analysis of Distributive Bargaining: some terms

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Normative Analysis of Distributive Bargaining
some terms
BATNA Best Alternative To a Negotiated
Agreement. This is your most preferred course of
action if negotiations break down. Reservation
Price A negotiators bottom line. If the
negotiator can not achieve a price that is at
least as good as her RP, she will not agree to a
deal. Bargaining Zone/Zone of Possible Agreement
The region bounded by the reservation prices in
which an agreement is possible.
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Bargaining Zone Analysis
B5
S5
S2
S3
S4
S1
B1
B2
B3
B4
Srp
Brp
200K 225K
235K
260K
zopa
S1 The listing price is 260K.
B1 Thats much higher than I can afford. But I
could manage 200K
S2 You must be joking! I mean, I could go as
low as 250K, but.
B2 Well, what if I were to come up to 212K?
S3 Well, if you are able to move quickly on
this, I guess I could sell for 244K
B3 Thats kind of you, but still high compared
to comparables. How about 219?
S4 No, but were getting closer... My wifell
kill me--but what if we say 240K?
B4 It would really be hard for me to go any
higher than 224K
S5 I shouldnt do this...but were so close.
Why not split the difference at 232K?
B5 Well.alright, you have yourself a deal!
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Distributive Bargaining Some Empirical Patterns
1) A very good predictor of the final outcome is
the mid-point between each partys opening bid,
provided this falls within the ZOPA. 2)
Boulwarism doesnt often work well. People are
more sensitive to your willingness to make
concessions than they are to the reasonableness
of your opening bid. 3) People are more
sensitive to the rate of concessions than they
are to the magnitude of those concessions.
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Some Prescriptions for Distributive
Bargaining Preparation
1) Know your BATNA. Try to improve it if
possible. 2) Determine your reservation price in
advance. Make friends with your BATNA. 3) Try to
determine your counterparts BATNA and guess
their reservation price. 4) Set a goal or
aspiration that is optimistic but not absurd. 5)
Plan your opening. It should be a)
significantly better than your reservation price
(leaving room for concessions) and b) not so
extreme that you lose credibility. 6) Think of
what objective standards might be acceptable to
the other party.
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Some Prescriptions for Distributive
Bargaining During the Negotiation
7) Use the norm of reciprocity to your advantage.
Avoid making unilateral concessions. 8) Be wary
of fair solutions proposed by the other side.
Note that we are all self-interested in choosing
fairness norms. 9) Be patient. Dont give in too
easily. 10) Never gloat or reveal your true
reservation price after a deal!
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Why didnt I negotiate?
Some poor excuses 1) I didnt know it was an
option. 2) I feel uncomfortable negotiating.
3) My counterpart has no authority.
More defensible rationale 4) I don't want to
undermine my relationship. 5) I approve of the
norm against negotiating. 6) The issue is too
trivial or unimportant.