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BUS 485
Week 3: Grand Strand
 Agenda

Biases in Grand Debrief & Principled

Negotiation Strand Feedback Negotiation
Biases in Negotiation
Biases in Negotiation
•Bias is a mental shortcut that unconsciously
affects perceptions & conclusions
•Can reinforce conflict and competition in
negotiations
Availability Heuristic and Confirmation Bias
• Availability: tend to rely too much on readily available
information, even if it is not most reliable or relevant
• more vivid information
• information that is unusual or more easily remembered
• Confirmation Bias: we tend to seek out information to
confirm our beliefs and hypothesis
• ignore or discount other relevant information
• attention can be primed to look for that information
Framing & Endowment Effect
• Framing: decisions can be impacted on how information is
presented and the reference point
• Framed of a “good deal” can lead you to value something
more than you would have otherwise
• Framing as a gain or a loss can change your risk tolerance
• Tolerate less risk of losing potential gains as compare
with potential losses, even if they are the same result
• Endowment effect: when we own something, giving it up
requires more from us than we would give to acquire it
Fundamental Attribution Error
• Tend to overestimate the cause of another’s behaviour in
terms of personal or internal factors
• i.e. they got this wrong because they are incompetent
• Underestimate the role of situational or external factors
• i.e. it was not incompetence, but they did not have time
due to an emergency
• Result: judge others more harshly than ourselves
• Try to focus on objective facts, not attributions
Illusion of Transparency
• We tend to be too confident that others fully understand
what we mean to communicate
• What we say can take on many different meanings
• Assume that others understand us so tend not to explain
fully, leave message unclear
• Don’t assume – ask others what they mean, and ask them to
confirm your meaning
Escalation of Commitment & Anchoring
Escalation of Commitment
• Many refuse to deviate from their initial approach even
when it is failing
• Counteract:
• Recognize sunk costs cannot be recovered
• Consider only future costs and benefits
Anchoring Bias (last week)
• Tend to rely too heavily on the first piece of information
offered.
Overconfidence & Egocentrism
• Overconfidence: Inflated confidence in our own judgments
and choices
• Egocentrism: Negotiators’ self-serving beliefs that their
position is the most fair and right
• Counteract with advice (neutral parties; third parties with
expertise)
• Ask yourself: “Why might this be the wrong decision?”
Grand Strand
Debrief Questions
• Buyer’s BATNA? RP? Interests?
• Seller’s BATNA? RP? Interests?
• If you were a buyer, did you reveal your BATNA?
• What other information did you choose to reveal or conceal? Why?
• What makes a good agreement?
• If you tried to make an objective valuation of the B&B, what was it?
• What were your opening offers?
• At what point during the negotiations were numbers discussed?
• Did anyone turn down an offer to work at Swansea?
Grand Strand – Seller
Interests:
• pay debt
• change careers
• 1-year spiritual retreat
BATNA: weak because needs to sell immediately due to debt
RP: $920 K
• needs $800 K immediately for debt
• needs $120 K for living expenses & kids’ tuition, but not
immediately
Grand Strand - Buyer
Interests:
• land & B&B (expansion)
• full control of property
• open to employing owner somehow
• European quality furnishings
BATNA: purchase larger property for $1.3 M
RP: $850 K
• $1.15 M – $300 K for neighbouring property
ZOPA / Bargaining Zone
Information Sharing
What information should you conceal / reveal?
• Useful to reveal information about your interests and
priorities
• vacation and job
• forms a basis for creating value
• builds trust
• Not useful to share information that will reveal your
reservation price
• debt / marital problems
Principled Concessions
Accompany your concessions with a reason or explanation for
making the concession
• If there is no reason, other party will conclude your price is
arbitrary
• Will want to push for more concessions because won’t know
if close to your RP
Lessons from Grand Strand?
• Creating value is an important negotiation technique
• APPEARS to be negative bargaining zone, but getting behind
positions to interests helps to “expand the pie”
• Creative solutions can result in an agreement
• Use preparation to help you find ways to create value
• Distributive negotiating style (extreme opening offers) can
make it more difficult to create value
• May need to revisit issues/proposals
Principled
Negotiation
Integrative Negotiation
• Distributive vs. Integrative
• Distributive: about increasing your share of the pie
(competitive, value claiming)
• Integrative: about increasing the pie as a whole so that
you both get a larger share (cooperative, value creating)
• Most negotiations involve both value claiming and value
creating
• More complex and difficult
• Both competition and cooperation
Interests vs. Positions
Two people want one orange

Position: both say they need

ALL of it

Look at underlying interests:

• Rind
• Fruit

Both can achieve 100% of their

interests, instead of settling for
something less
Positional Bargaining
Each side takes a position, tries to persuade the other side, and makes
concessions to reach a compromise.
Problems:
• People get locked into their position
• Inefficient back and forth
• Obscures true interests
• Does not usually result in the best agreements
• Can hurt relationships
Principled Negotiation
Identify INTERESTS and bargain over those
• Helps define the problem – where is the conflict, and what are the
potential solutions?
Principled negotiation allows you to:
• Decide issues on their merits
• Create value and find mutual gains
• Resolve conflicts through fair standards
Be FIRM on your INTERESTS but FLEXIBLE on the SOLUTION
• Don’t compromise just to compromise
Interests: Selling a House
After you identify the issues in the negotiation
PRIORITIZE
Identify your interests:
• Profit 2
• Least amount of stress and hassle 3
• Done in time for wedding 1
Preparation
Identify and try to improve your BATNA
• Could you attract more buyers if you drop the price or wait for the
busy seasons? Can you rent out your property? Do you have
another purchaser?
Assess the other party
• BATNA: Interested in other properties?
• Is there something else they have to offer? Or that you can offer?
i.e. if purchaser is a wedding planner / caterer / has a wedding
venue, they can add that as part of the exchange
4 Parts of Principled Negotiations
1. Separate the people from the problem
2. Focus on interests, not positions
3. Generate possibilities for mutual gain before your
decision
4. Use objective criteria as a basis for your decision
Separate People from the Problem
Problem-solving instead of competing against people
Likely to result in better solution & better relationship
• Parties likely to accept jointly-developed solutions
• Can address their concerns where possible to do so
without unduly compromising your own interests
Communication is key
• Use active listening, ask questions, don’t assume!
How to Deal with…
Perceptual Differences
• May see facts differently and have differing preferences on outcomes
• Discuss and identify differing perceptions
• Use active listening to confirm / demonstrate your understanding of
their perspective
Emotional Reactions
• Emotions can run high and jeopardize an agreement
• Recognize emotions and listen without blame
• Try interacting outside of the negotiation (i.e. lunch)
Focus on Interests
• Use open questions to probe behind their positions and demands to
discover their interests.
• Ask “Why?” or “Why not?”
• More likely to find solution than if you argue with them
• Use active listening to confirm understanding of their interests
• Try to deal with their interests as well as your own
• Describe your interests/reasons first, then offer proposals
• Be open to solutions that might satisfy your interests that you have
not considered
Inventing Options
• In advance!
• Look for lots of options
• Avoid assuming that there is a fixed-pie; try to create value!
• Try to help them solve their problem too
• Find mutual interests - create a shared goal
• Dovetail differing interests (orange example)
• Trade off items that are of low cost to you and high
benefit to them (and vice versa)
Objective Criteria
Independent of each side’s will; should be legitimate and practical
Objective standards
• blue book value; past sales; similar contracts or other precedents;
scientific or professional standards; efficiency
Objective procedures
• one cuts, other chooses; experts; arbitrator; court
Be open to reason as which standards should be used
Don’t give in to pressure when you can find a principled reason for your
agreement.
Objective Criteria
Why?
• Reinforces use of principled bargaining in the future
•Reinforces the relationship
•Helps counter biases

Frame a negotiation as a search for objective criteria instead

of trading positions
• Both sides feel better about the agreement