• International Business Negotiation

• Course Code: ECON 637009.01

• Semester: Fall 2024
• Course Credits: 2 credits
• Program: EMA
• Classroom: H6306
• Lecture Times: 8:00-8:45am, 8:55-9:40 am, 9:55-10:40am every Monday from 09/02/2023 to
11/22/2023

• Instructor: Yang Zhou

• Email: [email protected]
• Office: 220 Handan Rd, Building No.11 Room 109
• Office Hour: By appointment
• TA: Jaylyn Chen
• Email:[email protected]
Course Objectives
Enable students to have a deeper understanding of

1) the dynamic of interpersonal and inter-group conflicts and its resolution

2) navigating negotiation under the background of globalization
3) the mechanism of international economics
TEXTBOOK:

i) Essentials of Negotiation (6th edition) Roy J. Lewicki, Bruce Barry, David

M. Saunders
ii) International Economics Robert C. Feenstra, Alan M. Taylor
iii) An Introduction to Game Theory Martin J. Osborne

Course Grading Policy - The final grade is determined as follows:

Attendance: 10%

In-Class Participation: 20%

Assignment: 35% *Group presentation at the end of the class

Essay: 35%
Chapter 1

THE NATURE OF NEGOTIATION

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INTRODUCTION

Negotiation is something
that everyone does,
almost daily

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NEGOTIATIONS
Negotiations occur for several reasons:

• To agree on how to share or divide a limited

resource *services such as time and labor also counted as resources

• To create something new that neither party could

attain on his or her own
• To resolve a problem or dispute between the
parties
Consumer only have limited resources and income, and would like to maximise happiness
L = u + lamda C
U (x,y) = Utilitiy function of x and y
so that Px X + Py Y less than Income

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APPROACH TO THE SUBJECT
Most people think bargaining and negotiation mean
the same thing; however, we will be distinctive about
the way we use these two words:
• Bargaining: describes the competitive, win–lose
situation ex. auctions, or choosing which canteen to eat for lunch

• Negotiation: refers to win–win situations such as

those that occur when parties try to find a mutually
acceptable solution to a complex conflict
ex. sallary negotiation
Profit = revenue - cost

In real life, its often occurs between the two of it (bargaining and negotiation)

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 THREE IMPORTANT THEMES

1.The definition of negotiation and the basic

characteristics of negotiation situations
2.Interdependence, the relationship between people and
groups that most often leads them to negotiate
3.Understanding the dynamics of conflict and conflict
management processes which serve as a backdrop for
different ways that people approach and manage
negotiations

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CHARACTERISTICS OF A
NEGOTIATION SITUATION
• There are two or more parties
• There is a conflict of needs and desires between two or
more parties
• Parties negotiate because they think they can get a
better deal than by simply accepting what the other side
offers them
• Parties expect a “give-and-take” process

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CHARACTERISTICS OF A
NEGOTIATION SITUATION
• Parties search for agreement rather than:
§ Fight openly
§ Capitulate
§ Break off contact permanently
§ Take their dispute to a third party
• Successful negotiation involves:
§ Management of tangibles (e.g., the price or the terms of
agreement)
§ Resolution of intangibles (the underlying psychological
motivations) such as winning, losing, saving face
i.e self esteem, feelings

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INTERDEPENDENCE
In negotiation, parties need each other to
achieve their preferred outcomes or objectives.
• This mutual dependency is called
interdependence
• Interdependent goals are an important aspect
of negotiation
• Win–lose: I win, you lose
• Win–win: Opportunities for both parties to gain

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INTERDEPENDENCE

• Interdependent parties are characterized by

interlocking goals
• Having interdependent goals does not mean
that everyone wants or needs exactly the same
thing
• A mix of convergent and conflicting goals
characterizes many interdependent
relationships

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TYPES OF INTERDEPENDENCE
AFFECT OUTCOMES
• Interdependence and the structure of the
situation shape processes and outcomes
§ Zero-sum or distributive – one winner
§ Non-zero-sum or integrative – mutual gains
situation

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ALTERNATIVES SHAPE INTERDEPENDENCE

• Evaluating interdependence depends heavily on

the alternatives to working together
• The desirability to work together is better for
outcomes
• Best available alternative: BATNA (acronym for Best
Alternative to a Negotiated Agreement)
ex. when you got multiple job offer, but there is a better options/opportunity
other example, a competitive market industry where the costumer got multiple options of product and they can choose which one can provide the best profuct with cheaper price

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MUTUAL ADJUSTMENT
• Continues throughout the negotiation as both
parties act to influence the other
• One of the key causes of the changes that
occur during a negotiation
• The effective negotiator needs to understand
how people will adjust and readjust and how
the negotiations might twist and turn, based
on one’s own moves and the other’s responses

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MUTUAL ADJUSTMENT AND
CONCESSION MAKING

• When one party agrees to make a change in

his/her position, a concession has been made
• Concessions restrict the range of options
• When a concession is made, the bargaining
range is further constrained

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TWO DILEMMAS IN
MUTUAL ADJUSTMENT
• Dilemma of honesty
§ Concern about how much of the truth to tell the
other party
how much you want to reveal/show w yourself

• Dilemma of trust
§ Concern about how much should negotiators believe
what the other party tells them
Utility 2
you dont want to the other person tells you

share just right, and shouldnt trust the whole things other people said

Utility 1

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VALUE CLAIMING AND VALUE CREATION
• Opportunities to “win” or share resources
§ Claiming value: result of zero-sum or distributive
situations where the object is to gain largest piece of
resource
§ Creating value: result of non-zero-sum or integrative
situation where the object is to have both parties do
well

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VALUE CLAIMING AND VALUE CREATION
• Most actual negotiations are a combination of claiming
and creating value processes
§ Negotiators must be able to recognize situations that require
more of one approach than the other
§ Negotiators must be versatile in their comfort and use of both
major strategic approaches
§ Negotiator perceptions of situations tend to be biased toward
seeing problems as more distributive/competitive than they
really are

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VALUE CLAIMING AND VALUE CREATION

Value differences that exist between negotiators

include:
• Differences in interests
• Differences in judgments about the future
• Differences in risk tolerance
• Differences in time preferences
*look for HP Filter using R

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CONFLICT

Conflict may be defined as a:

“sharp disagreement or opposition” and
includes “the perceived divergence of interest,
or a belief that the parties’ current aspirations
cannot be achieved simultaneously”

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 LEVELS OF CONFLICT

• Intrapersonal or intrapsychic conflict

§ Conflict that occurs within an individual
Ø We want an ice cream cone badly, but we know that ice
cream is very fattening

• Interpersonal conflict
§ Conflict is between individuals
Ø Conflict between bosses and subordinates, spouses, siblings,
roommates, neighbors, etc.

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LEVELS OF CONFLICT

• Intragroup Conflict
• Conflict is within a group
• Among team and committee members, within families,
classes etc.

• Intergroup Conflict
• Conflict can occur between organizations, ethnic
groups, warring nations, feuding families, or within
splintered, fragmented communities
• These negotiations are the most complex

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DYSFUNCTIONS OF CONFLICT

1.Competitive, win–lose goals

2.Misperception and bias
3.Emotionality
4.Decreased communication
5.Blurred issues
6.Rigid commitments
7.Magnified differences, minimized similarities
8.Escalation of conflict

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FUNCTIONS OF CONFLICT
1.Makes organizational members more aware and
able to cope with problems through discussion.
2.Promises organizational change and adaptation.
3.Strengthens relationships and heightens morale.
4.Promotes awareness of self and others.
5.Enhances personal development.
6.Encourages psychological development—it helps
people become more accurate and realistic in
their self-appraisals.
7.Can be stimulating and fun.
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FIGURE 1.3 THE DUAL CONCERNS MODEL
5 different types of handling a conflict

negotiating

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STYLES OF CONFLICT MANAGEMENT

1. Contending (also called competing or

dominating)
• Actors pursue own outcomes strongly, show little
concern for other party obtaining their desired outcomes
2. Yielding (also called accommodating or
obliging)
• Actors show little interest in whether they attain own
outcomes, but are quite interested in whether the other
party attains their outcomes
3. Inaction (also called avoiding)
• Actors show little interest in whether they attain own
outcomes, and little concern about whether the other
party obtains their outcomes

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STYLES OF CONFLICT MANAGEMENT
4. Problem solving (also called collaborating or
integrating)
• Actors show high concern in obtaining own outcomes, as
well as high concern for the other party obtaining their
outcomes
5. Compromising
• Actors show moderate concern in obtaining own
outcomes, as well as moderate concern for the other
party obtaining their outcomes

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Three Types of Flows Among Countries:

• Flows of Products :Trade in goods and services (change in

current account)

• Flows of People: Migration

• Flows of Capital: Foreign Direct Investment (FDI, change in

capital account)
Questions to be addressed in International Economics, e.g.

• Why are these international flows so common ?

• What are the impacts of these flows for countries involved?

• What policies do governments implement to make their

countries more or less open to these international flows?

• Etc…
International Trade

• Exports: Good and Services sold from one country to

another

• Imports: Goods and Services bought from one country from

another

Trade in Goods: Agricultural, Manufactural Products

Trade in Services: Travel and tourism, education, consulting…

Data Source:

• World Bank Open Data

• IMF Data
• WTO Statistics
• UN Comtrade
• UNCTAD World Integrated Trade Solutions
• Eurostat
• OCED.Stat

Classification:
• Standard International Trade Classification (SITC) :maintained by the United
Nations
• Harmonized System (HS code): maintained by World Customs Organization
• Broad Economics Categories (BEC): maintained by United Nations Statistics
Division
SITC: The SITC is the commodity classification system used by the United Nations for
trade data. Countries use the 5-digit SITC to report export and import data to the United
Nations. SITC classifies merchandise in approximately 3,000 commodity groups and is
not as detailed as the Harmonized System (HS).
HS code: The Harmonized System is the most widely used trade classification system
in the world. It is used by 177 countries to classify over 5,000 commodity groups, each
identified with a 6-digit code.
BEC: a three-digit classification, which groups transportable goods according to their
main end use. It is most often used for the general economic analysis of international
merchandise trade data. The BEC system is defined in terms of the SITC system.

SNA: System of National Account: capital goods, intermediate goods,

consumption goods
Other Classification Systems of Economic Activities:

North American Industry Classification System (NAICS):

a classification of business establishments by type of economic
activity (the process of production). It is used by government and
business in Canada, Mexico, and the United States of America.

International Standard Industrial Classification of All Economic

Activities (ISIC):
the international reference classification of productive
activities. Its main purpose is to provide a set of activity
categories that can be utilized for the collection and
reporting of statistics according to such activities.