1 chapter two strategy and tactics of distributive bargaining (slicing the pie)

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CHAPTER TWO

Strategy and Tactics of

Distributive Bargaining

(Slicing the Pie)

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The Distributive Bargaining

Situation• Goals of one party are in

fundamental, direct conflict to another party

• Resources are fixed and limited

• Maximizing one’s own share of resources is the goal

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The Distributive Bargaining Situation

Preparation—set a• Target point, aspiration point• Walkaway, resistance point• Asking price, initial offer

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The Distributive Bargaining

Situation

Party B - Buyer

Party A - Seller

Walkaway Point Target Point Asking Price

Initial Offer Target Point Walkaway Point

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The Role of Alternatives to a Negotiated Agreement

• Alternatives give the negotiator power to walk away from the negotiation – If alternatives are attractive, negotiators

can:• Set their goals higher• Make fewer concessions

– If there are no attractive alternatives:• Negotiators have much less bargaining power

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The Distributive Bargaining

Situation

Party B - Buyer

Party A - Seller

Walkaway Point Target Point Asking Price

Initial Offer Target Point Walkaway PointAlternative

Alternative

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Negative Bargaining Zone

Seller’s Bargaining Range

Buyer’s Bargaining Range

$5 $10 $15 $20

Negative Bargaining Zone

BT, Buyer’s Target Point

BR, Buyer’s Walkaway

SR, Seller’s Walkaway

ST, Seller’s Target Point

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The Most Commonly Asked Questions• Should I reveal my reservation point?

• Should I lie about my reservation point?• Should I try to manipulate the other party’s

reservation point?• Should I make a “final offer” or commit to a

position?

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Fundamental Strategies

• Push for settlement near opponent’s resistance point

• Get the other party to change their resistance point

• If settlement range is negative, either:– Get the other side to change their

resistance point– Modify your own resistance point

• Convince the other party that the settlement is the best possible

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Keys to the Strategies

The keys to implementing any of the four strategies are:

• Discovering the other party’s resistance point

• Influencing the other party’s resistance point

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Tactical Tasks of Negotiators

• Assess outcome values and the costs of termination for the other party

• Manage the other party’s impressions• Modify the other party’s perceptions• Manipulate the actual costs of delay or

termination

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Assess Outcome Values and the Costs of Termination for

the Other Party• Indirectly

– Determine information opponent used to set:• Target• Resistance points

• Directly– Opponent reveals the information

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Manage the Other Party’s Impressions

• Screen your behavior:– Say and do as little as possible

• Direct action to alter impressions– Present facts that enhance one’s

position

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Modify the Other Party’s Perceptions

• Make outcomes appear less attractive

• Make the cost of obtaining goals appear higher

• Make demands and positions appear more or less attractive to the other party –whichever suits your needs

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Manipulate the Actual Costs of

Delay or Termination• Plan disruptive action– Raise the costs of delay to the other

party

• Form an alliance with outsiders– Involve (or threaten to involve) other

parties who can influence the outcome in your favor

• Schedule manipulations– One party is usually more vulnerable to

delaying than the other

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Positions Taken During Negotiations

• Opening offer– Where will you start?

• Opening stance– What is your attitude?

• Competitive? Moderate?

• Initial concessions– Should any be made? If so, how

large?

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Positions Taken During Negotiations

• The role of concessions– Without them, there is either capitulation

or deadlock

• Patterns of concession making– The pattern contains valuable information

• Final offer (making a commitment)– “This is all I can do”

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Thompson’s Pie-Slicing Strategies (I)

• Strategy 1: Assess your BATNA and improve it• Strategy 2: Determine your reservation point, but do

not reveal it• Strategy 3: Research the other party’s BATNA and

estimate their reservation point• Strategy 4: Set high aspirations (be realistic, but

optimistic)• Strategy 5: Make the first offer (if you are prepared)• Strategy 6: Immediately reanchor if the other party

opens first

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Thompson’s Pie-Slicing Strategies (II)

• Strategy 7: Plan your concessions• Pattern of concessions• Magnitude of concessions (GRIT model)• Timing of concessions

• Strategy 8: Use an objective-appearing rationale to support your offers

• Strategy 9: Appeal to norms of fairness• Strategy 10: Do not fall for the “even split” ploy

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Closing the Deal

• Provide alternatives (2 or 3 packages)

• Assume the close• Split the difference• Exploding offers• Deal sweeteners

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Dealing with Typical Hardball Tactics

• Four main options:– Ignore them– Discuss them– Respond in kind– Co-opt the other party (befriend

them)

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Typical Hardball Tactics

• Good Cop/Bad Cop• Lowball/Highball• Bogey (playing up an issue of

little importance)• The Nibble (asking for a

number of small concessions to)

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Typical Hardball Tactics

• Chicken• Intimidation• Aggressive Behavior• Snow Job (overwhelm the other

party with information)

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Summary

Negotiators need to:• Set a clear target and resistance points• Understand and work to improve their

BATNA• Start with good opening offer• Make appropriate concessions• Manage the commitment process