MMI 1050 Negotiations Lecture 2

2 types of negotiation: Distributive vs integrative negotiations

1. Distributive
 Involve only one issue
 Simply dividing the pie
 Usually opposing interests
 Win-lose/Zero-sum
2. Integrative
 Involve multiple issues
 Opportunity for enlarging the pie
 Can increase the available benefits by capitalizing on different preferences
 Can be win-win; relationship-based

Types of issues in new recruit

1. Compatible (What is the middle ground in this negotiation?)

 Interests are aligned
 Both parties want the same outcome (filling a job position)
 Location and job assignment
2. Distributive (When there are opposed interests)
 Interests are perfectly opposed
 Competitive/Zero-sum
 Salary and starting date
3. Integrative
 Interests are asymmetrical, but not perfectly opposed
 Some things matter more to one party than to the other
 Cooperative
 Bonus, Moving expenses, insurance, vacation time

Integrative approach: Give a concession and claim the other component as that is how both parties win.

To know how to do the integrative approach (how would a party know what concessions to make):

Mid-point approach: Do not do this as won’t win-win as leaving opportunities on the table.

Make sure for next negotiation, list what may be compatible/win-win with the other party to build
relationship. Make small concessions but win at the big issues.

Strategy: When reached an impasse (sign of a distributive issue), don’t get stuck. Discuss other parts and
circle back.

Pareto-efficiency

- There is no other agreement that would make one party better off without making the other
party worse off
 MMI 1050 Negotiations Lecture 2

- Pareto-inefficient: An alternative exists that would benefit one party without injuring the other
- In distributive bargaining: One party’s gain is exactly the other party’s loss
- In integrative bargaining: The efficient frontier is further out because there is a possibility of
trade-offs
- Supported that the mid-point approach would also result in a worse off outcome.

The negotiator’s dilemma

- Integrative and distributive negotiations are not separable

- Approaches to creating value are vulnerable
- You claim, I claim: Mediocre for both of us
- You claim, I create: Great for you, terrible for me
- You

A two-dimensional model of negotiation behaviour

Integrative possibilities (Making the pie bigger)

- Multiple issues
- Differing interests
- Differing strengths of preference:
o Difference in priorities
o Risk preferences
o Time preferences

Creating value by sharing information: When should you share information?

- The other party shares information

- Both of you are concerned about your reputation
- You both want to establish a long-term relationship
- You trust the other party to be cooperative

What information should I share?

- Negotiator’s individual gain not hindered by revealing priorities among issues

- Remember not to disclose your reservation price (the lowest of the lowest)

How to negotiate?

1. Issue-by-issue
o A series of sequential distributive negotiations
o Contentious and prescriptive. Not a good negotiation
2. Package deals
 MMI 1050 Negotiations Lecture 2

o Understanding interests and priorities; finding issues to trade off on.

Multiple equivalent simultaneous offers (MESOs)

- Present multiple offers of equal value to you

- Ask which offer your counterpart prefers
- Advantages
o Collect information from the other party
o Anchor the negotiation but still appear flexible

Negotiator toolbox: Integrative negotiation strategies

- See slides