Getting (more of) what you want

Chapter four: VALUE CREATING

The ultimate goal of negotiations is to claim value- to get more of what you want
Value creation in negotiation has several benefits:
a. It increases the amount of value that can be allocated between the parties
b. Value creation has a psychological benefit- By improving the deal for your counterpart, you
increase his goodwill toward you. Even when you end up with objectively the same amount, he
may give you credit for your cooperative engagement

THE INTEGRATIVE POTENTIAL

value creation hinges on the parties' ability to discover that they value issues differently and to use that
information to propose packages that make them better off. Often this isn't easy-but if it's
accomplished, the value available to be claimed by one or both parties can be much greater than in a
purely distributive negotiation.

The challenge of realizing the integrative potential of a deal requires that you understand the issues and
your preferences as well as the issues and preferences as valued by your counterpart. This is important
for three reasons. First, it provides information that allows you to agree only to deals that do not violate
your package-level reservation price. Second, it allows you to make trades that create value. Finally, it
allows you to claim more of the value that has been created.

In negotiations not only can you gather information during the preparation phase, but also the
negotiation itself can provide numerous opportunities not only to verify the information you gathered in
the planning phase but also to expand your knowledge. In the next section, we demonstrate strategies
and tactics that allow you to exchange information while minimizing the impact of this information
exchange on your ability to claim value.

THE INFORMATION-GATHERING TECHNIQUE

To create value in a negotiation the parties must share information that will allow them to identify the
issues; determine which are distributive, integrative, and congruent; and for integrative issues, allow
trades that reflect their respective differences in value.

Yet sharing too much information (or the wrong kind) can put you at a competitive disadvantage.
Specifically, value creation does not change either party's reservation price. As a result, your counterpart
could claim all the value created (and then some) if she could infer your reservation price from the
information shared.

From an economics perspective, sharing information in the value creation process creates two
challenges:
 A. separating the negotiation into a value-creating phase and a value-claiming phase runs the risk
of limiting the value you can claim
B. the negotiator who first realizes the value differential between the parties has an increased
capacity to claim the value created

Sharing information indiscriminately is potentially disastrous: If such sharing behavior is not

reciprocated, you run the risk that if a deal is consummated, all you would claim is your reservation
price. But when all information is shared by both parties, you may be able to create the largest pie
possible, but you almost certainly won't be able to claim more than half of it because your counterpart
will be attempting to claim as much as possible as well

MITIGATING THE RISK OF INFORMATION EXCHANGE

you need to be ready to problem-solve-that is; to craft proposals that take advantage of the
asymmetries in preferences between you and your counterpart to create value without unnecessarily
Sharing information that could damage your ability to claim value. This 'requires focused information
gathering and thoughtful sharing.

THE MIND AND HEART OF THE NEGOTIATOR BY LEIGH THOMPSON

WIN-WIN NEGOTIATION: EXPANDING THE PIE

Even the most contentious negotiations contain potential for win-win agreements.
Win-win negotiation means that all creative opportunities are leveraged and no resources are
left on the table. The outcomes are called integrative negotiations.
Win-win is not:
a. compromise- this is when parties reach a middle ground
b. even split- how the bargaining zone is divided among negotiators
c. satisfaction
d. building a relationship

TELLTALE SIGNS OF A WIN-WIN POTENTIAL

The questions that negotiators should ask when assessing the potential of a negotiation
situation are:
a. does the negotiation contain more than one issue?
b. can other issues be brought in?
 c. can side deals be made?
d. do parties have different preferences across negotiation issues?

True win-win or integrative negotiations leave no resources underutilized.

There are three levels of integrative agreements

Level 3: pareto-optimal
Level 2: settlement demonstrably superior to other feasible settlements
Level 1: mutual agreement (positive bargaining zone)

Level 1 integrative agreements exceed parties’ no-agreement possibilities, or reservation

points.
Level 2 integrative agreements are better for both parties than are other feasible negotiated
agreements
Level 3 integrative agreements are settlements that lie along the pareto-optimal frontier of
agreement, meaning that no other feasible agreement exists that would improve one party’s
outcome while simultaneously not hurting another party’s outcome.

The two key problems that negotiators encounter are:

a. false conflict or illusory conflict- people believe that their interests are incompatible
b. fixed-pie perception- the belief that the other party’s interests are directly and
completely opposed to one’s own interest
STRATEGIES THAT DO NOT WORK
a. commitment to reaching a win-win deal
b. compromise
c. focusing on a long-term relationship
d. adopting a cooperative orientation
e. taking extra time to negotiate

STRATEGIES THAT WORK

a. perspective-taking
b. asking questions about interests and priorities
c. providing information about your interests and priorities
d. unbundle the issues
 e. make package deals, not single-issue offers
f. make multiple offers of equivalent sales simultaneously

Negotiators who make multiple, equivalent offers have an edge in five critical aspects:
a. They are more aggressive in terms of anchoring the negotiation favorably
b. They gain better information about the other party
c. Are more persistent
d. Signal their priorities more effectively
e. Overcome concession aversion on the part of the other side

structure contingency contracts by capitalizing on differences

negotiators can exploit differences to capitalize on integrative agreements in various ways. The
differences include:
a. differences in the valuation of negotiation issues
b. differences in expectations of uncertain events
c. differences in risk attitudes
d. differences in time preferences
e. differences in capabilities
Presettlement settlements have three characteristics
a. they are formal
b. are initial
c. they are partial

CHAPTER 5: THE FIFTH FOUNDATION; THE OTHER PARTY’S INTERESTS

Skilled negotiators spend substantial time investigating the other party’ needs
It is so hard to discover the other party’s true goals because of:
a. confirmation bias- people see what they are looking for
b. fixed pie bias- people tend to frame negotiations in competitive terms
c. trying too hard to accommodate
FOUR STEPS TO HELP FOCUS ATTENTION ON WHAT THE OTHER PARTY WANTS:
A. identify the decision maker
 B. look for common ground-how might it serve the other party’s interests to help you
achieve your goals?
C. Identify interests that might interfere with agreement- why might the other side say no?
D. Search for low-cost options that solve the other party’s problems while advancing your
goals

CHAPTER 7: DISTRIBUTIVE NEGOTIATIONS: THE BASIC PROBLEM

When two bargainers have to jointly decide on a determinate value of some continuous
variable like money, they can mutually adjust. One bargainer wants the value to be high while
the other one wants the value to be low
Reservation values- each bargainer established a threshold value that they need
Buyer’s and seller’s surpluses
If x is greater than s, then x-s is the sellers surplus
If x is greater than b, then b-x is buyer’s surplus
Zone of possible agreement
S< b is the zone of possible agreement

NEGOTIATING YOUR NEXT JOB: HAVARD BUSINESS REVIEW

Focus on your roles, responsibilities
Negotiators too often start their preparation focused on the opportunity right in front of them
rather than on their ultimate work and life aspirations.

1. -start with your career goals

In our experience, negotiators too often start their preparation focused on the opportunity
right in front of them, such as a job offer, rather than on their ultimate work and life
aspirations. As you enter a period of change in your career, you should think about your short-
and long-term aims and then map backward from those objectives to define the next steps you
want to take. Don’t forget to include quality-of-life considerations as well as professional ones.
And be prepared to defer gratification if that’s the right thing to do for the endgame.
2. Understand what you’re negotiating for
 3. Reduce ambiguity about what, how and with whom to negotiate- Stretch your inquiry
beyond your closest networks to ensure that you have the broadest information
possible
4. Enhance Your Negotiations Through Relationships—and Vice Versa

Batten down the anchors: Responding to another negotiator’s first offer

Brian C. Gunia
Don’t accept first offers
What does this research tell us about accepting first offers, even really good ones? accepting
any offer–—even a really good one–—is not a great idea. By negotiating instead of accepting,
you–—like the buyers who always negotiated–—can not only get a better deal for yourself, but
you can make the other party happier. It is one of life’s few, real two-for-one deals. Even in the
case of a surprisingly good offer from the other side, then, I would not advise you to accept it
immediately. I would first revisit your figures, as in the case of the mediocre offer. Assuming all
is well, though, I would go back for a negotiation. No real need for a joke, process comment, or
face-saving maneuver, but I would still give the other side at least the appearance of a tough
negotiation, if only to ensure that they don’t walk away feeling burned.

6: ELMTREE HOUSE
The chapter presents a case study portraying a prototypical, distributive negotiation. The seller (a
nonprofit) wishes to sell an asset (the residence) to a buyer (a developer); The two parties disagree on
the price, and they negotiate. Each wants to claim a larger share of a fixed pie. The two parties negotiate
over one issue: money in this case, but it could be time or anything else. In this chapter we give partisan
advice (asymmetric prescriptive in our lingo) to the seller based on a descriptive assessment of the
behavior of the buyer.

In preparing for a distributive negotiation (or the distributive aspects of a larger negotiation), the seller
first determines his reservation price, the minimum value he would just be willing to accept. The seller
then considers his (probabilistic) perception of the reservation price of the buyer, and may solicit help
from experts. The seller next reviews his tactics for the upcoming negotiations: preliminary rhetoric,
who should attend, where, opening gambits, who should start, how should the other react, anchoring,
and so on

The typical “dance ofconcessions,” in which the parties pretend to be ready to walk out while assessing
the possibility that the other is telling the truth, may be frustrating and inelegant, but it tends to work
well in practice. In the laboratory, parties rarely walk away when there is a positive zone ofpossible
agreement (ZOPA).
In this case, after a disappointing round of first-stage posturing, the parties moved toward a final
contract. In the closing, the seller introduced nonmonetary options that might have resulted in joint
gains (the buyer providing services in kind such as renovation or help with moving) but this was not
achieved.

THINK BEFORE YOU SPEAK CHAPTER 6: IMPLEMENTING A COMPETITIVE

STRATEGY

The situations where a competitive strategy might be used:

a. The goals of the parties are short-term
b. The parties assume that their goals are incompatible
c. The tangible or more quantifiable, objective benefits are the most important to you-
factors such as price, interest rate, number of items, delivery terms
d. You are likely to use a competitive strategy when you expect the other party to take a
competitive stance

Bargaining range
This is the focal point in a competitive situation
The starting point is where you commence bargaining

Key points in competitive bargaining are target, starting point and walkaway point

Suggestions for defining your bargaining range

a. Define your walkaway point in advance-point to stop bargaining
b. Have a good alternative
c. Focus only on this deal
d. Get as much information as you can without giving much away
e. Set the opening as high or as low as possible

Guidelines for effective competitive negotiation

 a. Stick to your planned target and walkway points
b. Do not reveal your target point too early
c. Never reveal your walkaway point
d. Get the other party to make big concessions
e. Keep your concessions few and small
Tactics
Hardball-playing the tough guy
Good guy/bad guy
Highball/lowball
Bogey
Use emotional tactics
Conceal information
Ally with outsiders
Manipulate the actual costs of delay or ending negotiation
The two kinds of commitments are
a. Threats and promises
b. Final offers
How to cope with the other party’s tactical moves
a. Ignore them
b. Confront the issue
c. Retaliate
d. Sidetrack it before it happens