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Psych 253 Judgments and Decisions Negotiations

Psych 253 Judgments and Decisions Negotiations. Barbara Mellers. Negotiations and Conflict Resolution. An independent service station in the Port of Los Angeles is for sale by owners (married couple) Texoil , a large petroleum refining company, is a potential buyer ( Texoil representative)

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Psych 253 Judgments and Decisions Negotiations

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  1. Psych 253 Judgments and DecisionsNegotiations Barbara Mellers Negotiations and Conflict Resolution

  2. An independent service station in the Port of Los Angeles is for sale by owners (married couple) • Texoil, a large petroleum refining company, is a potential buyer (Texoil representative) • Parties have 5 minutes to prepare and 30 minutes to negotiate and discuss Texoil’spossible purchase of the service station • When you prepare, think about your BATNA, your reservation price, and your underlying INTERESTS! Texoil

  3. Each Side’s Information

  4. Each Side’s Information $675,000 (Build one) $400,000 (BP offer)

  5. Each Side’s Information $675,000 (Build one) $400,000 (BP offer) $553,000 ($488,000 after taxes) Boat loan: $230,000 Boat ready: $68,000 Food, health, clothing: $75,000 Boat repairs: $40,000 Savings after return: $75,000 $500,000 Why not $675K? Minimart = $100K Upgrades = $??

  6. Each Side’s Information $675,000 (Build one) $400,000 (BP offer) $553,000 ($488,000 after taxes) Boat loan: $230,000 Boat ready: $68,000 Food, health, clothing: $75,000 Boat repairs: $40,000 Savings after return: $75,000 $500,000 Why not $675K? Minimart = $100K Upgrades = $?? Time off (2 years) Spouse’s health Sail around the world Savings / future income Health insurance, food, etc. Good price Good managers Station Ownership

  7. Who reached an agreement? • What kind of information did you share? • What was the key to an agreement?

  8. Station Owner’s Reservation Price ($553,000) Texoil Rep’s Reservation Price ($500,000) Initial Texoil Situation 400 450 500 550 600 650 700 700 BATNA For Station Owner (or, stay put) BATNA For Texoil Rep Sale Price (in thousands)

  9. Station Owner’s Reservation Price ($467,000) Texoil Rep’s Reservation Price ($500,000) Revised Texoil Situation:If Texoil Representative includes Job Offer Upon Return 530 520 490 510 500 480 460 470 Sale Price (in thousands)

  10. Multiple issues • Differing preferences, expectations, risk attitudes • Differing interests • Future relationship • Multiple alternatives Characteristics of Integrative Bargaining

  11. One issue Many issues Win-Lose Win-Win Outcome Process and outcome Max share of pie Max size and share of pie One time Repeated times One position Many options Keep interests hidden Share interests Keep information hidden Share information Competitive Cooperative/Competitive Position-based Interest-based Distributive Integrative Bargaining Bargaining

  12. TACTICS Analyze own & other’s interests Analyze own & other’s priorities Prepare multi-issue proposals Think creatively about shared interests Define your BATNA Define your reservation price Define your target level Prepare objective rationales Distributive IntegrativeBargaining Bargaining

  13. Open high Anchor with first offer Discuss single issue Make bi-lateral, not unilateral concessions Persuade through objective rationale Cooperate Build trust Make package deals Make multiple offers simultaneously Ask for and share info about interests & priorities

  14. Negotiators may have: Escalated commitment to positions Tried to win over all else Believed that the pie was fixed (other party’s interests are opposite yours) Had positive illusions and unrealistic aspirations Had negative views of opponent Why did impasses occur?

  15. Separate people from problem • Should you be a hard or soft negotiator? • Focus on interests, not positions • Generate multiple possibilities • Base results on objective standards Integrative Negotiation

  16. Improve outcomes • Create more stable agreements • Improve implementation • Strengthen the relationship Advantages of Integrative Agreements

  17. The non-separabilityof integrative and distributive negotiations • “Value that has been created must be claimed” • Tactics that claim value can impede its creation • Persuading, withholding information • Approaches to creating value are vulnerable to claiming tactics • Disclosing interests, priorities But..

  18. The Prisoner’s Dilemma

  19. The Negotiator's Dilemma

  20. Prepare for integrative and distributive opportunities • Analyze own & other’s interests; avoid fixed-pie perception • Know your BATNA, Res Price, objective arguments • Balance cooperation and competition • Build trust: don’t jump in trusting immediately, but be open to a trusting interaction • Ask for and share info about interests & priorities, but watch out for unilateral information exchange Resolving the Dilemma

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