Rational Bargaining

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Rational Bargaining

• What is meant by rational bargaining
• John Nash on bargaining
• Fisher and Ury principled negotiation

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Bill and Jack
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John Nash

• Nash does not look at how you arrive at a
  soulution the focus is the content of the
  solution
• Nash assumptions
• Rational bargainers who can compare each others
  desires for various things
• Bargainers who have equal bargaining skills
• Bargainers have full knowledge of tastes and
  preferences of the other

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Bill and Jack
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Bill and Jack in Negotek
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Bill and Jack both gain
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John Nash

• Nashassumptions may not always hold
• Zero-sum or non-cooperative behaviour
• Non-sero sum or co-operative behaviour
• These match our Red and Blue negotiation
  styles
• Distributive bargainers (claimers)
• Integrative bargainers (creators)

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Benefits of bargaining
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Are people rational?

• Kennedy The main problem with assuming
  rationality is that it is at variance with how
  people behave
• Irrational escalation
• Fixed pies
• Anchoring
• Referent behaviour
• Fallacy of prominence
• Overconfidence

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Fisher and Ury Getting to yes
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Principled solution
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Fisher and Urys prescriptions
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BATNA

• Best Alternative to a Negotiated Agreement
• On which basis will you agree to or walk away
  from a bargain
• Norwegian BATFOL Beste Alternativ Til en
  FOrhandlings Løsning

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Negotiators as mediators
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Streetwise Manipulation
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Streetwise Manipulation

• A ploy recognised is a ploy disarmed
• You need to know the ploys in order to understand
  when they are used against you
• Ploys may affect power, which again affect what
  outcome you expect

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Chester L. Karass
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Chester L. Karass
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First Seminar on Negotiating Changed My Life

• When you are about to say yes, say no one more
  time.
• Learn not to flinch.
• Leave less on the table and leave others
  satisfied.
• Start out with low, opening offer.
• Encourage the other party to open up first.
• The use of time is important.

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First Seminar on Negotiating Changed My Life

• Make concession on a minor issue.
• Take time to answer questions.
• Confusion can exist between need and want.
• Negotiate on small items.
• Learn when to leave

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Power and outcome
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Who has the power?
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Ploys

• All ploys belong to one of three main types
• Dominance
• Shaping
• Closing

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Dominance ploys

• Negotiators may seek to dominate in the opening
  phase of negotiation
• Pre-conditions
• This is non-negotiable!
• Rigging the agenda

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Shaping ploys

• Often used in the middle of negotiations to
  affect what one party may feel is possible
• This is the final offer
• Fait-accompli
• Tough Guy/Soft Guy almost everybody sound in
  body and mind knows of it, so I wonder why it
  still works
• The Bogey

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Karass Bogey

• Let's say you want to landscape and fence your
  backyard in an unusual way. The job is reasonably
  complex due to the layout. You get a bid of
  25,000 from a local contractor. It is neither
  the lowest nor highest bid, but you decide it is
  the most reliable and responsiveyou'd like to do
  business with them.
• The trouble is you only want to spend 18,000 to
  20,000 for the project. So you try a Bogey. You
  tell the contractor that you really love their
  proposal, but I only have 18,000 to spend. The
  contractor will generally respond to the 18,000
  Bogey by either changing their proposal or
  exploring what alternatives are available.

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Karass Bogey

• The U.S. Government uses it when they tell a
  defense contractor to take a closer look at their
  million-dollar proposal because the government
  budget is only 700,000.
• A school district uses it when it tells its
  architect to redesign the high-school building to
  fit the 22 million limitation imposed by the
  bond financing.

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Karass Bogey

• A project manager uses it when she tells her
  technical services department that the
  implementation schedule only allows twelve
  man-days for their portion of the project.
• An industrial buyer uses it when showing the
  salesperson that the amount budgeted by the
  accounting department is less than what the
  seller bid.

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Shaping ploys, continued

• The Krunch you have to do better than that
• The Nibble if you cant get a dinner, get a
  sandwich
• Salami ploy
• Sell cheap, get famous
• Add-on
• Limited authority

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Closing ploys

• Quivering Quill
• Yes, but
• Now or Never
• Take It or Leave It
• Split the Difference

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Karass split the difference

• I know buyers who use the spilt approach. They
  make a low starting offer, raise it only
  slightly, and then say, "Okay, let's split the
  difference." These buyers know it's hard for a
  salesperson to say no to such a reasonable
  request. The salesperson gets sucked into the
  split and then discovers they give away
  information to justify why a simple split is not
  equitable and use this as an opportunity to
  explore other options.