Managing negotiations: Getting to yes – Summary
Samirah Bakker
Rational & Strategic
Lecture 1:
Lecture 1: Introduction & Essentials of negotiating
There is dramatic (and disturbing) evidence that most people do not live up to their negotiating
potential.
Negotiating can be learned → Effective negotiation requires practice and feedback.
Multidisciplinary field
- Game theory
- Decision analysis
- Behavioral decision making
- Social psychology
- Philosophy (ethics)
- Neurobiology
Negotiation is everywhere (at home, buying a car, discussing salary etc).
Importance of negotiation in career
- Average person stays in a job for 4.4 years.
- Decentralized decision making in businesses: Less hierarchy means continuous negotiations.
- Freelance economy: Negotiating every gig/project.
- Entrepreneurial environment: Negotiating many deals.
Integrating interests
,Definitions of negotiation
‘ A process in which two or more parties exchange goods or services and attempt to agree upon the
exchange rate for them’.
More broadly → ‘Negotiation is an interpersonal decision-making process necessary whenever we
cannot achieve our objectives single-handedly’.
Scope
- One-on one <> multiparty
- Few dollars <> Billion of dollars
- Few minutes <> years
- Single encounter <> long-term relationship
- Single issue <> Multiple issues
Types
- Between two persons or multiple persons.
- Salary negotiations, division of tasks within a team.
- Between two organizations or multiple organizations.
- Mergers and acquisitions, joint ventures.
- Between two countries or multiple countries.
- Border conflicts, EU negotiations (brexit).
- Between an organization and a social movement.
- Shell vs climate activists.
- Between an organization and a state.
- United nations vs a (member) country.
Single issue, distributive negotiation
→ One party’s gain is the other party’s loss.
Target points, reservation points and bargaining zone
- Target point / aspiration point → Price you would be happy with.
- Reservation point → Price at which you are indifferent between getting the deal or not getting
the deal (worst acceptable outcome).
- Bargaining zone/ zone of possible agreements → Range between reservation points of both
negotiators.
,How to determine aspiration point?
Determining target/aspiration point sounds straightforward, but three problems might arise:
1. Under-aspiring negotiator.
- Settles for too low; often, first offer is accepted immediately.
2. Over-aspiring negotiator.
- Wants to settle for too high; refuses to make concessions.
3. Grass is greener negotiator.
- Doesn’t know what s/he wants to settle for, only that it is more/different than what the
other party is willing to offer (reactive).
How to determine reservation point?
- Before you start negotiating, you should determine your reservation point (price at which you
are indifferent between getting the deal or not getting the deal).
- Consider the consequences of failing to reach an agreement, and know your alternatives.
- Determine your BATNA (Your Best Alternative To a Negotiated Agreement) and quantify it.
What is the purpose of a BATNA?
- Your BATNA protects you against:
- Accepting an agreement you should reject.
- Rejecting an agreement you should accept.
Characteristics of the BATNA:
- Determines lowest value acceptable.
- If you don’t reach an agreement, settle for your BATNA.
- Any deal higher than your BATNA is better than impasse.
Be aware: BATNAs are time sensitive.
, The better your BATNA, the greater your power
Negotiation power is not (directly) defined by:
- Wealth
- Political connections
- Physical strength
- Friends
- Military might
It is defined by:
- Your alternative (attractiveness of not reaching this specific agreement).
‘Falling in love’-rule
- Never fall in love with a job, a house etc.
- Always keep multiple options open.
- Constantly try to improve your BATNA.
Lecture 2:
Game theoretic approach – Part 1
Single issue, distributive negotiation
- One party’s gain is the other party’s loss.
Your BATNA should be based on facts
- Your BATNA is not something that you wish for; it is determined by objective reality.
- Don’t let your BATNA be influenced by the other party’s persuasion techniques. Your
BATNA should only change as a result of objective facts and evidence.
- Of course, in real life you deal with:
- Incomplete information.
- Uncertainty (e.g., unverifiable information).
- Multi-dimension agreements.
What you can do in practice
1. Brainstorm your alternatives.
2. Evaluate each alternative.
3. Attempt to improve your BATNA.
4. Determine your reservation price.
BATNA of the other side
- Often, the aspiration point of the other is quite clear.
- More important: what is their reservation price?
- Try to estimate the BATNA of the other side.
- But: also be modest about what you really know.
Samirah Bakker
Rational & Strategic
Lecture 1:
Lecture 1: Introduction & Essentials of negotiating
There is dramatic (and disturbing) evidence that most people do not live up to their negotiating
potential.
Negotiating can be learned → Effective negotiation requires practice and feedback.
Multidisciplinary field
- Game theory
- Decision analysis
- Behavioral decision making
- Social psychology
- Philosophy (ethics)
- Neurobiology
Negotiation is everywhere (at home, buying a car, discussing salary etc).
Importance of negotiation in career
- Average person stays in a job for 4.4 years.
- Decentralized decision making in businesses: Less hierarchy means continuous negotiations.
- Freelance economy: Negotiating every gig/project.
- Entrepreneurial environment: Negotiating many deals.
Integrating interests
,Definitions of negotiation
‘ A process in which two or more parties exchange goods or services and attempt to agree upon the
exchange rate for them’.
More broadly → ‘Negotiation is an interpersonal decision-making process necessary whenever we
cannot achieve our objectives single-handedly’.
Scope
- One-on one <> multiparty
- Few dollars <> Billion of dollars
- Few minutes <> years
- Single encounter <> long-term relationship
- Single issue <> Multiple issues
Types
- Between two persons or multiple persons.
- Salary negotiations, division of tasks within a team.
- Between two organizations or multiple organizations.
- Mergers and acquisitions, joint ventures.
- Between two countries or multiple countries.
- Border conflicts, EU negotiations (brexit).
- Between an organization and a social movement.
- Shell vs climate activists.
- Between an organization and a state.
- United nations vs a (member) country.
Single issue, distributive negotiation
→ One party’s gain is the other party’s loss.
Target points, reservation points and bargaining zone
- Target point / aspiration point → Price you would be happy with.
- Reservation point → Price at which you are indifferent between getting the deal or not getting
the deal (worst acceptable outcome).
- Bargaining zone/ zone of possible agreements → Range between reservation points of both
negotiators.
,How to determine aspiration point?
Determining target/aspiration point sounds straightforward, but three problems might arise:
1. Under-aspiring negotiator.
- Settles for too low; often, first offer is accepted immediately.
2. Over-aspiring negotiator.
- Wants to settle for too high; refuses to make concessions.
3. Grass is greener negotiator.
- Doesn’t know what s/he wants to settle for, only that it is more/different than what the
other party is willing to offer (reactive).
How to determine reservation point?
- Before you start negotiating, you should determine your reservation point (price at which you
are indifferent between getting the deal or not getting the deal).
- Consider the consequences of failing to reach an agreement, and know your alternatives.
- Determine your BATNA (Your Best Alternative To a Negotiated Agreement) and quantify it.
What is the purpose of a BATNA?
- Your BATNA protects you against:
- Accepting an agreement you should reject.
- Rejecting an agreement you should accept.
Characteristics of the BATNA:
- Determines lowest value acceptable.
- If you don’t reach an agreement, settle for your BATNA.
- Any deal higher than your BATNA is better than impasse.
Be aware: BATNAs are time sensitive.
, The better your BATNA, the greater your power
Negotiation power is not (directly) defined by:
- Wealth
- Political connections
- Physical strength
- Friends
- Military might
It is defined by:
- Your alternative (attractiveness of not reaching this specific agreement).
‘Falling in love’-rule
- Never fall in love with a job, a house etc.
- Always keep multiple options open.
- Constantly try to improve your BATNA.
Lecture 2:
Game theoretic approach – Part 1
Single issue, distributive negotiation
- One party’s gain is the other party’s loss.
Your BATNA should be based on facts
- Your BATNA is not something that you wish for; it is determined by objective reality.
- Don’t let your BATNA be influenced by the other party’s persuasion techniques. Your
BATNA should only change as a result of objective facts and evidence.
- Of course, in real life you deal with:
- Incomplete information.
- Uncertainty (e.g., unverifiable information).
- Multi-dimension agreements.
What you can do in practice
1. Brainstorm your alternatives.
2. Evaluate each alternative.
3. Attempt to improve your BATNA.
4. Determine your reservation price.
BATNA of the other side
- Often, the aspiration point of the other is quite clear.
- More important: what is their reservation price?
- Try to estimate the BATNA of the other side.
- But: also be modest about what you really know.
