Strategy and Tactics of Distributive Bargaining

1. Strategy and Tactics of Distributive Bargaining

2. Real Estate Transaction • Basic elements of a distributive bargaining (“DB”) situation: • Win-lose, competitive, or distributive nature • Strategies emphasize how to increase one’s share of the fixed “pie” • Information is given and sought for strategic advantage only • Objectionable? Maybe. Avoidable? No!

3. Distributive Bargaining:Bargaining Range and Key Points • Target points (goals) • Resistance points (aka reservation points) RPs are most important! • Opening points (initial offers, demands or proposals) • Bargaining range, settlement range, or zone of potential agreement is defined by RPs, and may be positive or negative

4. Distributive Bargaining Concepts(contd) • Role of alternatives (i.e., BATNA) • Parties usually have option of failing to agree • Those options or alternatives strongly influence RPs, may define them • Settlement point • Each side wants to claim as much of bargaining range as possible, i.e. to claim the “surplus” beyond its RP • Parties must believe they got the best deal possible, or at least a “satisficing” deal; else they seek revenge or back out

5. Distributive Bargaining Concepts(contd) • Bargaining Mix -- what issues? • Single issue: rare, the exception • Most negotiations involve packages or bundles of positions on a number of issues, making trade-offs possible • Single issues good for illustrating basic concepts, theory, but note that this is an abstraction, atypical

6. DB: Fundamental Strategies • Four fundamental strategies • Trying to claim as much of the bargaining range (or surplus) for one’s self as possible • Persuading opponent to change RP, thereby shifting the settlement range in your favor • If no positive settlement range initially, persuade opponent to change • Persuade opponent that the settlement offered is the best for them; best they can do

7. DB: Discovering Opponent’s RP • How low will they go? (Or how high?) • Communication is complex: Recall dilemmas noted earlier re: • Honesty • Trust • Etc. • Each side wants to give, conceal, and get information, and the other side knows it

8. DB: Changing Their RP • Three key factors • Value they attach to particular outcome • Costs for them of delay or difficulty in negots. • Costs for them of aborting negotiations (failing to agree) • Also, must address their understanding of your situation, perception of what’s possible, and thus the value they assign to outcomes

9. DB: Changing Their RP (contd) • Four general propositions (assume you’re buyer): • Their RP varies directly with their perception of your cost of delay or aborting negots. • Their RP varies inversely with their cost of delay or aborting negots. • Their RP varies directly with the value they attach to the outcome • Their RP varies inversely with the value you attach to an outcome

10. Tactical Tasks in DB • Task 1: Assess their outcome values (utilities) and costs of aborting negotiations • Indirect assessment: Try to determine the information they used to set RPs and targets, and how they interpret it • Direct assessment: Not easy given dilemmas, but sometimes they’ll be clear about their outcome values and costs (near a deadline?), and their conduct may provide clues

11. Tactical Tasks in DB (contd) • Task 2: Manage Their Impression • Screening: Stressed in early stages to gain info on their views; representation more important later (silence is golden; invest in questions) • Concealment is most general tactic, may involve use of “stooges” who can’t reveal info, calculated incompetence, or spokesperson control • Alt strategy: “Snow job” -- bury them in info • Direct actions to alter impressions • Selective presentation • Logical argument to show you discount an outcome • Emotional reactions • Amount of attention, scrutiny, stress or clarification

12. Tactical Tasks in DB (contd) • Task 3: Modify Their Perceptions • Interpret outcomes: Point out why their favored solution is not so good for them after all • Concealment: Allowing their misperception to continue rather than attempting to correct it

13. Tactical Tasks in DB (contd) • Task 4: Manipulate Costs of Delay or Termination (Aborting Negotiations) • Disruptive action: Increase their costs of failing to agree • Ally with outsiders who can affect outcomes (e.g., university depts and accrediting groups) • Scheduling of negotiations; power may vary with timing (e.g., seasonal industry), work it to your advantage

14. DB Positions and Their Roles • Opening offer: Extremes give room to maneuver, signal needs for their concessions, but also risk easy dismissal and can stifle cooperation • Opening stance should be consistent with opening offer; expect reciprocity • Initial concessions convey symbolic messages (e.g., flexibility or firmness) • Role of concessions: Expected, and explicit links to previous concessions are common • Patterns and timing of concessions send signals • Final offer: Can be conveyed explicitly as such or by substantial concession

15. DB: The Role of Commitment • Signals intent, firmness; exerts pressure • “I can’t move, so you must” • Can involve promises; ongoing credibility requires they be kept (but see next point!) • Plan a way out: sometimes commitments must be abandoned • Help them abandon commitments when it’s advantageous for you to have them move • General rule: You want to appear committed and keep them flexible

16. DB: Establishing Commitment • Public pronouncements (betting your reputation) • Linking with allies (e.g., overtly contacting an alternative partner) • Increase prominence of demands through formality, repetition, emotional display, etc. • Reinforce threats or promises, possibly act to indicate preparation to implement them

17. DB: Preventing Their Premature Commitment (To Outcomes You Oppose) • Ignore it • Downplay its significance and firmness • Humor • Changing the subject • “Flinch” • Don’t call attention to it, don’t ask about it

18. DB: Finding A Way Out(Abandoning Prior Commitments) • New information (had I known ...) • External forces • Public opinion • Pressure from authorities • Broader interests (the public good, peace, etc.) • Reinterpretting (e.g., what was seen as an insignificant concession by them takes on new significance)

19. Closing The Deal -- Tactics • Provide alternatives -- let them pick • Assume the close -- “Could I have your name and address for the forms … ?” • Split the (unresolved) difference • Exploding or fused offers -- “This offer expires, you must act now!” • Sweeteners -- “And I’ll throw in new deluxe floormats!”

20. DB: Hardball Tactics(aka Dirty Tricks) • General nature: Coercive, exploiting fears and anxieties. Many consider some or all unethical. Also, they’re dangerous! Can backfire. Not recommended. • Some specific examples • Good guy/bad guy • Highball/lowball • Bogey or decoy • The nibble or afterbite • Chicken • Intimidation or aggressive behavior • Lying, deliberate errors, bluffing, etc.

21. DB: Dealing With Hardball Tactics • General issues • Important to recognize them and make a strategic response. Don’t let them work. • Optimal response depends on BATNA, timeframe for relationship, among others • Some specific options • Ignore them • Discuss them • Respond in kind • Co-opt the other party