Games people play: negotiations

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WHAT IS NEGOTIATION?

D1

D2

DISCUSSION

D4

Dn

D3

D5

SOLUTION

WHAT IS NEGOTIATION? D1 D2 DISCUSSION D4 Dn D3 D5 SOLUTION

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GAME THEORY

● Game simulates real life
● Includes 5 elements:
Players = decision makers
Strategies

GAME THEORY ● Game simulates real life ● Includes 5 elements: Players
available
Rules
Outcomes
Payoffs

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AN EXAMPLE OF GAME THEORY: THE PRISONER'S DILEMMA

AN EXAMPLE OF GAME THEORY: THE PRISONER'S DILEMMA

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TYPES OF NEGOTIATIONS

DISTRIBUTIVE
Involve win-lose, fixed-amount situations wherein one party’s gain is

TYPES OF NEGOTIATIONS DISTRIBUTIVE Involve win-lose, fixed-amount situations wherein one party’s gain
another party’s loss
INTEGRATIVE
Involve joint problem solving to achieve results benefiting both parties which can lead to win-win or lose-lose outcome

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FOUR KEY CONCEPTS

BATNA
Reservation Price
ZOPA
Value Creation

FOUR KEY CONCEPTS BATNA Reservation Price ZOPA Value Creation

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KNOW YOUR BATNA!

Best Alternative to a Negotiated Agreement (BATNA)
Typical example: negotiate or

KNOW YOUR BATNA! Best Alternative to a Negotiated Agreement (BATNA) Typical example:
go to court
Improving your situation
Improve your BATNA
Identify the other side’s BATNA
Weaken the other party’s BATNA

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RESERVATION PRICE

The least favorable point at which one will accept a deal
The

RESERVATION PRICE The least favorable point at which one will accept a
“walk-away”
Example: you are looking for larger office space. You set your BATNA at $20/SF and your Reservation Price at 30$/SF

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ZOPA

Zone of Possible Agreement (ZOPA).
The difference between the Seller’s Reservation Price and

ZOPA Zone of Possible Agreement (ZOPA). The difference between the Seller’s Reservation
the Buyer’s Reservation Price

ZOPA

250$

275$

Seller’s
Reservation Price

Buyer’s Reservation Price

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QUESTION:

What will happen if we change points of buyer’s and seller’s reservation

QUESTION: What will happen if we change points of buyer’s and seller’s
price?

ZOPA

250$

275$

Seller’s
Reservation Price

Buyer’s Reservation Price

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VALUE CREATION

Create value = enlarge the pie
Basic principles:
Seek out shared interests
Propose mutually

VALUE CREATION Create value = enlarge the pie Basic principles: Seek out
beneficial trades
Secure insecure contracts

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PLANNING THE NEGOTIATIONS: PRE-NEGOTIATING

Objectives
What is involved? (+extremes)
Goals of opposition
NOT the costs => what

PLANNING THE NEGOTIATIONS: PRE-NEGOTIATING Objectives What is involved? (+extremes) Goals of opposition
is VALUABLE

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PLANNING THE NEGOTIATIONS: NEGOTIATING

confidence and power
keep the negotiation in your control
aim as high

PLANNING THE NEGOTIATIONS: NEGOTIATING confidence and power keep the negotiation in your
as you feel necessary
remain flexible
know your business

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COMING TO AN AGREEMENT

Write down the terms
Discourage the other side from seeking

COMING TO AN AGREEMENT Write down the terms Discourage the other side
further concessions
Be happy =)
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