Chapter 2 Strategy and Tactics on Distributive Bargaining

- Distributive Bargaining Win-Lose bargaining, the goals of one party are usually in fundamental and
direct conflict with the goals of the other party.
- Resources are fixed & limited; each party will use a set of strategies to maximize their own individual
outcomes.
- Single Deal = Negative effects of distributive bargaining mean less, when relationship with the other party is
not important, and therefore want to maximize as much value.
~ The Distributive Bargaining Situation
- Key Price Points:
1. Target Point/Aspiration Negotiators preferred price/optimal goal, which they would like to conclude
negotiations.
2. Resistance Point A negotiator's bottom line, the most they will pay as a buyer/seller = the smallest amount they
will settle for.
3. Initial Offer The first number the buyer will quote to the seller.
4. Asking Price The initial price set by the seller.
-

Bargaining Range/Settlement Range The spread between resistance points.

- This is the area the actual bargaining takes place, as anything outside these points will be rejected by 1/2
negotiators.

Positive Bargaining Ranges When the buyer's resistance point is above the seller's.
- I.E. Seller's Resistance = $130,000, Buyer's Resistance = $133,000
- This allows there to be an actual negotiation to occur.

Negative Bargaining Ranges The buyer's resistance point is below the seller's.
- I.E. Seller's Resistance = $145,000, Buyer's Resistance = $140,000
- Negotiations that begin with a negative bargaining range are likely a stalemate.
- They can only be resolved if one or both parties are persuaded to CHANGE their resistance points.

----------------------------------------------------------------~ Role of Alternatives in a Negotiation Agreement

- Alternatives are important because they give negotiators the power to walk away from any negotiation
when the emerging deal is not very good.
- More Alternatives = Can Set Goals Higher and make Fewer Concessions.
- Good distributive bargainers identify their realistic alternatives before starting discussions with the other
party.
- Having a BATNA Alternative provides a strong alternative that clarifies what he or she will do if an
agreement cannot be reached, and can achieve more of their goals through the negotiation.
----------------------------------------------------------------~ Reach a Positive Settlement Point = Goal of Distributive Bargaining
- The objective of both parties is to obtain as much of the bargaining range as possible [reaching as close as to the
other party's resistance point as possible].
-

For agreement to occur, both parties must believe that the settlement point, although perhaps less desirable
than they would prefer, is the BEST that they can get.
- Negotiators who think they did not get the Best, may try to recoup their losses or back out of the deal.
Bargaining Mix The package of issues for negotiation, each item in the mix has its own
starting/target/and resistance points.
- Some items are important to both parties, while some are only important to one party.

- I.E. The condo price negotiation also has a closing date of the sale issue, of when the ownership is
transferred, so that comes into play with the negotiation, and not only the price.
Distributive Bargaining = Largely on Resistance Points (2)
1. Discovering the Other Party's Resistance Point [Getting Informative About Resistance Pt]
- The more you learn about the other party's target, resistance point, motives, feelings etc., the better a agreement
you can reach.
- You also want the other party to have certain information, some factual and correct, while others lead the party to
believe things that are favorable to you.
2. Influencing the Other Party's Resistance Point
- Locating the other party's resistance point and then relating it to your own resistance point.
Tactical Tasks concerned with Targets, Resistance Points, and the Costs of Terminating Negotiations (4)
1. Assess the Other Party's Targets/Resistant Points/Cost of Terminating (2 Ways):
(1.) Indirect Assessment Obtaining information indirectly about the background of the other party.
= Determining what information an individual likely used to set their own resistant points, and how they
interpreted that information.
- I.E. In real estate negotiation, how long has the property been on the market, how many other potential buyers
actually exist, how soon a buyer needs to property for business or living.
(2.) Direct Assessment Usually the other party does not reveal accurate price info about their target/resistance
points, sometimes however the other party will provide accurate information.
- Especially when pushed to an absolute limit, they'll provide accurate info.
- I.E. In real estate buyer explains his absolute max price and support it with income and other expenses.
----------------------------------------------------------------2. Manage the Other Party's Impressions [Targets/Resistance Pts/Cost of Terminating]
(1.) Screening Activities [Useful in Beginning of Negotiation] Negotiators need to screen information about their
positions and to represent them as they would like the other to believe.
- Allowing time to gather info from other party used to evaluate resistance pts/, and the best way to provide info to
the other party about one's own position.
-

Concealment Method = Do/Say as LITTLE as Possible; Words should be invested in asking the other
negotiator questions.
- Silence = Reduces likelihood of slipping clues to the other party.

(2.) Direct Action to Alter Impressions

- Selective Presentation Negotiators reveal only the facts necessary to support their case.
- This can be used to lead the other party to form the desired impression of their resistance point or to
create new possibilities for agreement.
----------------------------------------------------------------3. Modify the other Party's Perceptions
- A negotiator can alter the other party's impressions of their own objectives by making outcomes appear less
attractive or by making the cost of obtaining them APPEAR higher.
----------------------------------------------------------------4. Manipulate the Actual Costs of Delay or Termination (3) ways
- Negotiators have deadlines (a contract expires) extending negotiations beyond a deadline can be costly.

- Manipulating a deadline or failing to agree by a particular deadline can be a powerful tool, to someone
who actually does not face deadline pressure.
1. Disruptive Action One way to encourage settlement is to increase the costs of not reaching a negotiated
agreement through disruptive action.
- I.E. Food-serve workers unionized had each person order a cup of coffee prior to lunch and drink it
leisurely at the target restaurant negotiating.
2. Alliance with Outsiders Another way to increase the costs of delay or terminate negotiations is to involve other
parties, who can somehow influence the outcome in the process.
3. Schedule Manipulation Purposefully schedule the negotiation to one party that may have a considerable
disadvantage.
- I.E. Business people going overseas often negotiate with suppliers immediately after
their arrival,
despite their jet lag.
----------------------------------------------------------------~ Positions Taken during Negotiations
-

Opening Offers [Modest vs. Exaggerated] Exaggerated opening offers get higher settlements, than
those who make low or modest opening offers.
- Other Party believes
1. There is a long way to go before a reasonable settlement will be achieved.
2. More concession that originally intended may have to be made.
3. The other party may have incorrectly estimated their own resistance point.

Caution The more exaggerated the offer, it may be rejected prematurely, communicates an attitude of
toughness that may harm long-term relationships.
Opening Stance Should be consistent with the opening offer.
- Moderate reasonable Bargaining Position = Friendly Stance
- Exaggerated bargaining Position = Tougher, more competitive stance.

Initial Concessions Opening offers copped with opening stances and initial concessions are elements that
set the tone to how the rest of the negotiation will proceed.
- If you make an Exaggerated opening offer, firm stance, and make very very little intial concession, creates
a firm climate that can be mimicked by the other party.
- Vs. a Reasonable, cooperative opening stance, and reasonable initial concessions communicates
flexibility.
----------------------------------------------------------------~ Role of Concessions (central to a negotiation)
- People enter negotiations expecting concessions.
- Immediate concessions (After first/2nd offer) are perceived less valuable, than gradual delayed
concessions, which appear to increase the perceived value of the concessions.
- Concession making indicates an acknowledgement of the other party and a movement toward the other's
position and it implies recognition of that position and its legitimacy.
- Reciprocal Concession If you make a concession, but if the other party does not reciprocate, the
concession maker may appear to be weak.
- If one party has made a major concession, it is expected that the return offer will be on the same item or
one of similar weight.
- However, if you receive an inadequate concession, negotiators may explicitly state what they expect
before offering further concessions.
- Packaging Concessions Can lead to better outcomes for negotiators than making concessions on

individual issues.
- I.E. "If you move on A and B, I will move on C and D"
~ Pattern of Concession Making
- When successive concessions get smaller = concessions maker's position is getting firmer and closer to
their resistant point.
-

It is important to convey the words to the other party when we negotiate that both our actions and our
words signal that the concessions are almost over.

----------------------------------------------------------------~ Final Offers

- Final Offers When a negotiator wants to convey that there is no further room for movement, and that the
present offer is the final one.
- I.E. Stating "This is All I can do" or "This is far as I can go"
- ** Note ** The other party may not recognize that as the final offer, and may feel betrayed, when no
counter concessions or further concessions are made.
-

Final offers and last concessions must be mores substantial, showing that the final offer is large enough to
be dramatic, but not so large that it creates the suspicion that the negotiator has been holding back, or there
is till more available in other issues in the bargaining mix.

~ Commitment
- Commitment Taking a bargaining position with some explicit or implicit pledge regarding the future
course of action.
- I.E. A sports agent who says to the GM of a sports team: "If we do not get the salary we want, my player
will sit out next year."
-

Purpose of Commitment = Reduce Ambiguity, about the negotiator's intended course of action.
- "If you pursue your goals as well, we are likely to come into direct conflict; either one of us will win or
neither of us will achieve our goals.

Commitments must be followed through, as the negotiator must act on their stated consequences.

- ** Note ** - Commitment exchange flexibility for certainty of a course of action, and create difficulties if you
want to move a new position.
- Especially if your earlier estimate of the other party's resistance point was wrong, and there is actually a
negative bargaining range.
- Therefore, one should always make contingency plans for a graceful exit should it be needed.
----------------------------------------------------------------~ Establishing a Commitment,
- Commitment Statement's (3) Properties
1. High degree of Finality
2. High degree of Specificity
3. Clear Statement of Consequences
- "We need a volume discount, or there will be trouble." vs. "We must have a 10% volume discount in the next
contract, or we will sign with an alternative supplier next month."
-

Public Pronouncement A commitment statement increases in potency when more people know about it.

Linking with an Outside Base Getting one or more allies is a way to strengthen a commitment.
I.E. Employees dissatisfied with management can form a committee to express their concerns.

----------------------------------------------------------------~ Finding Ways to Abandon a Committed Person

- Plan a Way Out When establishing a commitment, a negotiator should always plan a private way out.
- Reword a commitment to indicate that the conditions under which it applied have
changed.
- I.E. "Given what I've learned from you during this discussion, I see I am going to have
to rethink my earlier position.
- The reverse for the other party can be done, allowing the other party to abandon a
committed
position.: "I believe you will see that your earlier position no longer holds"
-Let it die silently
-Restate the commitment: In more general terms, change some of the details to be more in line with current needs.
- Minimize the Damage of the Other Party Help the other party save face should they back off from a
committed position.
- Make the public attribution about te other party's move to some noble/higher outside
cause.
~ Closing the Deal After negotiating for some time, you learn about the other party's needs, positions, and maybe
the resistance point, now is for the negotiator to close the agreement.
1. Provide Alternatives Rather than making a single offer, provide 2-3 alternative packages for the other party,
that are more or less equal in value.
2. Assume the Close Salespeople often use "Shall I get the paperwork started?" or initiate a discussion for the next
steps, that helps edge towards the close.
3. Split the Difference Giving a brief summary of the negotiation "we've both made many concessions and spent
alto of time, why don't we just split the difference?"
- This is an effective tactic as it presumes both parties started with fair openings.
4. Exploding Offers Contains an extremely tight deadline in order to pressure the other party to agree quickly and
is an extreme version of manipulating negotiating schedules.
- I.E. Person interviewed is offered an attractive salary, but also told the offer will expire in 24 hours.
- Purpose of the exploding offer is to convince the other party to accept the settlement
and to stop
considering alternatives.
5. Sweeteners Giving additional items to sweeten the deal. Negotiators need to include the sweetener in their
negotiation plans, or they may have conceded too much during the close.
- I.E. "I'll give you previously excluded curtains if you agree to the deal"
----------------------------------------------------------------~ Hardball Tactics Can backfire.
~ Dealing with Typical Hardball Tactics
1. Ignore them
2. Discuss Them Indicate you know that they're playing hardball, and offer to create better grounds/expectations
that both agree on in the negotiation.
3. Respond in Kind (With your own Hardball Tactic) - Responding in kind may be useful when another party is
testing your resolve, or how you respond to exaggerated positions. Although it can result in chaos, produce hard
feelings etc)
- Once both parties realize that they are skilled in hardball tactics, may recognize to try something
different.
4. Co-opt the other party : Befriend them before they use the tactics on you. More difficult to attack a friend than
an enemy.
~ Typical Hardball Tactics

1. Good Cop/Bad Cop One negotiator comes in as the Bad Cop, making it difficult to negotiate, and the other
negotiator plays the Good Cop and offers a better solution, which may lead to more concessions, before the bad cop
makes things worse.
- ** Note ** - This tactic is easily transparent, and requires quite a bit of energy/role
lead one off to obtaining their actual negotiation goals.

playing that may

2. Lowball/Highball Negotiators start with a ridiculously low/high opening offer, that they know they will never
achieve.
- ** The theory is that an extreme offer will cause the other party to reevaluate his or her own opening offer, and
move closer to or beyond their resistance point.
- The other party may think negotiating is a waste of time, and will stop. The negotiator thus must be very skilled to
justify the extreme opening offer, to make the other side willing to make a major concession toward the outrageous
bid.
3. Bogey: Negotiators pretend than an issue of little importance or no importance to them is quite important. Later
in the negotiation this issue can be traded for major concessions on issues that are actually important to them.
4. The Nibble Negotiators use the nibble tact to ask for a relatively small concession on an item that hasn't been
discussed previously in order to close the deal.
- I.E. I'll buy the suit if you throw in the tie for free, the tie is the nibble.
5. Chicken When both parties threaten a large bluff to force the other party to "chicken out" and give them what
they want.
- Chicken turns a negotiation into a serious game, in which one or both parties find it difficult to distinguish the
reality of their actual positions.
6. Intimidation where specific rules or procedures are available to impose on the negotiator to follow the process.
- Also guilt, negotiators question the other party's integrity/lack of trust in them.
- Explain that your policy to bargain is in a fair and respectful manner, and you expect the same in return.
7. Aggressive Behavior Pushing your position or attack the other's position.
- Aggressive tactics include a relentless push for further concessions.
- I.E. "You can do better than that" "What is the most that you will pay?"
- Solution: Talk about the negotiation process itself, and that aggressive tactics will not be tolerated.
8. Snow Job When negotiators overwhelm the other party with so much information, that they have trouble
determining, which facts are real or important, and which are merely distractions.
- I.E. Governments releasing a ton of information publicly, than answering the question.
- Highly technical language masked by a simple answer sent to a non-expert.
- Solution: Ask questions, until you receive a understandable answer, get an expert team.
- Listen carefully for consistent/inconsistent information.