MGMT 439- Negotiation Exam 1 Study Guide

Fall 2014


Be able to define the following concepts, explain their role in negotiations, and how
they contribute to (un)successful negotiations

Chapter 2
Distributive bargaining strategies: competitive/win-lose; goals of one party in
direct conflict with goals of other party; resources are fixed and limited, so each
party will use strategies to maximize share of outcomes
o Play a role in dividing up limited resources, so parties create and
implement strategies in order to enlarge the size of their pie piece
o Unsuccessful when parties focus so much on their differences, instead of
determining what they have in common
Counterproductive, costly and may not work
o Successful and useful when negotiators want to maximize value obtained
in a single deal, when relationship unimportant, and at value-claiming
Target point: the point at which a negotiator would like to conclude negotiations
o Sets the negotiators optimum goal; try to come to a settlement point
close to this point
o Negotiators will typically open their bids somewhat above or below their
target, to create a larger bargaining range
o Target points influence negotiator outcomes and satisfaction with a deal
Objective of distributive bargaining strategies
o Objective is to get the most of the limited resources at stake
Influence the other partys belief about whats possible
Learn as much as possible about the other partys position (their
resistance points)
Final goal is reach a final settlement close to the other partys R
o Obtain info indirectly about background factors behind an issue: indirect
assessment
o Obtain information directly from other party about their target and
resistance points: direct assessment
Resistance Point: the price beyond which a party will not go, a negotiators
bottom line (reservation price)
o Spread between the resistance points: bargaining range
o Positive bargaining range: when the buyers resistance point is above the
sellers; means that there is still room for negotiating without the parties
having to adjust their expectations/walk away
o Negative bargaining range: when the sellers resistance point is above the
buyers; means it can only be resolved if one/both parties are persuaded
to change their resistance points or if a solution is forced upon the parties
Or, the parties will walk away without making a deal (the most
likely outcome)
o Play an important role as a warning for the possible presence of hardball
tactics
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


Reaching agreements in distributive bargaining
o Parties are seeking their own advantage
o All tactics can escalate interaction to bitter hostility
o To be successful, both parties must feel the outcome was best they could
achieve, and worth accepting and supporting
Bargaining range: spread between the resistance points
o Positive bargaining range: when the buyers resistance point is above the
sellers; means that there is still room for negotiating without the parties
having to adjust their expectations/walk away
o Negative bargaining range: when the sellers resistance point is above the
buyers; means it can only be resolved if one/both parties are persuaded
to change their resistance points or if a solution is forced upon the parties
Or, the parties will walk away without making a deal (the most
likely outcome)
When do parties feel better about a settlement?
o Objective outcomes: assessment of the agreement against the negotiators
target and resistance points (did he/she achieve target? How close to
target? Was agreement below resistance? Was resistance exceeded on
purpose or by accident?)
o Subjective: cluster of psychological variables that negotiators use to
evaluate negotiation outcomes
Feelings about the outcome
Feelings about self
Feelings about the process
Feelings about the relationship
Concessions: what a party is willing to give up to move the negotiation closer to
an agreement
o Central to negotiation; if one party isnt prepared to make them, other
side must give in or the negotiation will deadlock
o Better to have gradual, delayed concessions, which appear to increase the
perceived value of the concession
o A good negotiator will not begin with an opening offer too close to their
own resistance point, but will ensure enough room in bargaining range to
make some concessions
Threats
o Long exaggerated statements undermine credibility; Simple = effective
o To reinforce threat in a commitment
Review similar circumstances and their consequences
Make obvious preparations to carry out a threat
Create and carry out minor threats in advance
o Research: negotiators who make threats are perceived as more powerful
than negotiators who dont
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


Also viewed as less cooperative, and their outcomes in integrative
situations are lower than those who dont use threats
Hardball tactics: pressure negotiators to do things they wouldnt otherwise
o Types:
Good cop/bad cop: alternating between negotiators who use
though and more lenient negotiation approaches
Counter by openly stating what the negotiators are doing
Lowball/highball: using extreme offers to change the anchor of
potential negotiation settlements
Good prep is a critical defense; will help you know general
range for value of item under discussion
Insist that youll only negotiate w/reasonable offer
Say you understand mkt value of item (w/evidence)
Threaten to leave briefly or for good
Respond w/extreme counteroffer to send message
Bogey: pretending a low priority item is important in order to
trade it for a concession on another item
Usually completely counter to what you expected
Ask questions about the reverse position
Nibble: asking for a proportionally small concession on a new item
to close the deal
Respond to each one, what else do you want?
Have your own nibbles prepared to offer in exchange
Chicken: using a large bluff plus a threat to for the other party to
concede
Preparation and thorough understanding of the situations
of both parties; external experts; DONT RESPOND
W/SAME
Intimidation: using emotional ploys such as anger and fear to force
concessions
Discuss the negotiation process with him/her
Ignore attempts by other party to intimidate you
Use a team to negotiate w/other party
o People not always intimidated by the same things
o Members can discuss tactics of other party; support
Snow job: overwhelm other party with so much info they cannot
make sense of it
Dont be afraid to ask questions until answer is understood
Suggest technical experts get together to discuss tech issues
Listen carefully to other party and identify inconsistent and
consistent information
o Important for negotiator to identify tactic quickly and understand what it
is and how it works
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014



Chapter 3
Integrative agreement process: goals of parties not mutually exclusive
o One partys gain isnt at the other partys expense
o Create a free flow of info; expand the size of the pie
o Emphasize commonalities and minimize differences
o Search for solutions that meets needs and objectives of both parties
Major steps in the integrative negotiation process
o Four major steps
Identify and define the problem (often the most difficult one)
Sets broad parameters, framework for discussion
Surface interests and needs
Generate alternative solutions
Evaluate and select alternatives
Substantive interests: related to focal issues that are under negotiation
o We want something b/c intrinsically satisfying (personal worth)
o We want something b/c it helps us achieve a long-term goal
Interests in integrative negotiation
o Process interests: how the negotiation unfolds
One pursues distributive, the other integrative
Intrinsic: allows a group to affirm the legitimacy and worth
Instrumental: if successful in gaining voice in negotiation, able to
demonstrate they should be invited back to negotiate
o Relationship interests: value of the ongoing relationship b/w parties and
future of the relationship
Intrinsic: when parties value for existence and pleasure
Instrumental: substantive benefits from relationship and dont
wish to endanger future benefits by souring it
o Interests in principle: what is fair, right, acceptable, ethical
May serve as dominant guides to their action
Intrinsic or instrumental (can be applied to future situations)
Logrolling: parties have more than one issue and have diff priorities for issues
o Trade off among issues so one party achieves preferred outcome on first
issue and same for the other on another issue
o Parties must establish issues at stake and decide individual priorities on
the issues
o More issues means negotiators reach better agreements
o Could be worse b/c negotiators feel they could have done better on
certain issues
o Unbundling: separating a single issue into more to make logrolling
happen
Identifying options and solutions
o Compromises: not a good integrative
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


Steps to complex problems/multiple solutions
Necessary requirements for integrative negotiation
o Presence of a common goal: key is that all sides can benefit
Common: all parties share equally
Shared: both parties work toward and benefit differently from it
Joint: individuals w/diff personal goals combining in collective
effort
o Fain in ones own problem-solving ability
Expertise helps in understanding problem, increase knowledge
base
Direct experiences increase sophistication
Knowledge of integrative tactics leads to an increase in integrative
behavior
o Belief in the validity of the other partys position
Believe in validity of ones own perspective
Accept validity of other partys perspective
Other partys should be valued no more or less than negotiators
o Motivation and commitment to work together
Negotiators can recognize that they share a common fate
Engage in commitments to each other before negotiations begin
Presettlement settlements
Create an umbrella agreement that provides a framework for
future discussions
o Trust
o Clear and accurate communication
Must be willing to share info about themselves
Must understand communication
Multiple comm channels will help negotiators clarify formal
communication/exchange info if formal channel breaks down
Metaphors: talking about one thing in terms of another
Why the other party is saying what they said
Help identify areas for mutual gain b/c insight into other
partys needs and motives
o Understanding of the dynamics of integrative negotiation
Developing trust
o Share information and encourage reciprocity
o Negotiate multiple issues simultaneously
o Make multiple offers at the same time
Pitfalls to integrative negotiation
o History of the relationship b/w parties
More competitive the past relationship, more likely negotiators
are to approach current negotiation defensively, win-lose attitude
Expectation of competitive opponent sufficient for defensiveness
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


o Belief that issue can only be resolved distributively
o Mixed-motive nature of most bargaining situations
Purely integrative/distributive negotiations rare; most mixed-
motive
o Short time perspectives

Chapter 4
Precursors for achieving negotiation objectives
o Effective planning and goal setting
o Successful negotiators:
Explore wider range of options for action
Worked harder to find common ground
More time considering long-term implications
More likely to set upper and lower limits
o Goals strategy planning
Good goals
o Wishes are NOT goals, theyre fantasies
Goal: specific, focused target
o Linkage b/w partys goals defines an issue to be settled
If you could achieve goal alone, no need to negotiate
o Boundaries to what realistic goals are
Must be attainable
o Effective goals must be concrete, specific, and measurable
Less concrete, harder to
Communicate what you want
Understand what other party wants
Determine if a given offer satisfies
Can be intangible, procedural goals
Strategy: broader picture; closer to your overall goal
Tactics: short-term moves designed to pursue broad strategies
o Subordinate to strategy; structured, directed and driven by strategic
considerations
Dual Concerns model: what strategies? (Figure 4.2, p. 118)
o Nonengagement strategy: Avoidance
Meet needs w/o negotiating at all
Not worth time and effort to negotiate
Decision to negotiate closely related to attractiveness of available
alternatives
Relational and substantive outcome NOT IMPORTANT
o Active-engagement: accommodation, competition, collaboration
Accommodation: imbalance of outcomes
Relationship outcome more important than substantive
outcome
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


Primary goal is to strengthen the relationship
Competition: substantive YES, relational NO
Collaboration: relational and substantive YES
Collaborative strategies
Accommodative strategies
Phase model
o Preparation
Whats important, define goals, think ahead how to work w/party
o Relationship building
Get to know other party, similarities/differences, trust and
commitment toward achieving mutually beneficial set of outcomes
o Information gathering
Learn what you need to about issues, other party and their needs,
feasibility of possible settlements, what happens if you fail to meet
agreement
o Information using
Assemble the case for preferred outcomes, to max negotiators
needs
o Bidding
Move from initial, ideal outcome to actual outcome
State opening offer and move to middle ground
o Closing the deal
Build commitment to agreement made in bidding phase
o Implementing the agreement
Who needs to do what once agreement reached
Reopen discussion and fix flaws
Interests: why a negotiator wants what he/she wants
o Substantive: directly related to focal issues under negotiation
o Process-based: how the negotiators behave as they negotiate
o Relationship-based: tied to current/desired future relationship b/w the 2
parties
o Intangibles: principles or standards to which parties adhere
Role of alternatives: other agreements negotiators could achieve and still meet
their needs
o Define whether the current outcome is better than another possibility
o Better alternatives means more power to walk away from negotiation

Chapter 6
What is Perception?: process by which individuals connect to their environment
o Negotiators approach each situation guided by their perceptions of past
situations and current attitudes and behaviors
o Process of screening, selecting and interpreting stimuli so that they have
meaning to the individual
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


o People interpret their environment so that they can respond
appropriately
Stages of the perceptual process
o Stimulus attention recognition translation behavior
Role of frames
o Frame: subjective mechanism through which people evaluate and make
sense out of situations
Effect of frames on negotiation types
Cultural elements with the Chinese
o Social linkage: Chinese believe that people should be viewed in context of
their larger social group rather than as isolated individuals
o Harmony: b/c people inherently imbedded in their social network,
peaceful coexistence is highly valued
o Roles: people must understand and abide by requirements of their role;
specify duties, power and privileges; specify where individual falls
o Reciprocal obligations: each role specifies obligations that people expect
to fulfill and receive w/in social network
o Face: face is lost if an individual acts in a manner that is inconsistent
w/his or her role or fails to fulfill reciprocal obligations
So valued that threat of losing it is primary force ensuring
fulfillment of obligations and continuance of hierarchy
Frames and conversation
Reframing: changes to the thrust, tone and focus of a conversation as the parties
engage in it
o Several things reframe issues
Arguments attacking the significance/stability of problems or the
feasibility of solutions
The ways parties make a case to other concerning logic of needs
Management and interaction of multiple issues on the negotiation
agenda
o Dynamic process that may occur many times in a conversation as parties
challenge each other or search for ways to reconcile seemingly
incompatible perspectives
o Parties propose a new way to approach the problem
o Negotiators alter their own message strategies as they come to
understand that an opponents frame has shifted
Cognitive bias: negotiators have tendency to make systematic errors when they
process information
o Irrational escalation of commitment: maintain commitment to a course of
action even when that commitment constitutes irrational behavior on
their part
Make decisions that stick with a failing course of action
o Mythical belief that issues under negotiation are all fixed-pie
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


tendency to see negotiation as zero-sum or win-lose situation w/
parties interests diametrically opposed
o Process of anchoring and adjustment in decision making
Being overly influenced by a standard or reference point and
failing to make adjustments from it
o Issue framing and risk
Tendency to be unduly influenced by positive or negative frame
through which risks are perceived
o Availability of information
Tendency to overweight info that is easily recalled at the expense
of info that is critical but less salient
o Winners curse
Tendency to settle quickly on an outcome and then feel discomfort
about a negotiation win that comes too easily
o Negotiator overconfidence
Tendency to believe that ones ability to be correct or accurate is
greater than is actually the case
o Law of small numbers
Draw inappropriate conclusions based on small data samples or a
small number of example
o Self-serving biases
Make attributions about causes of behavior that are self-serving
o Endowment effect
Inflate the value of something you own/have in your possession
o Tendency to ignore others cognitions
Failure to consider other partys thoughts and perceptions,
inhibiting and accurate understanding of their interest and goals
o Process of reactive devaluation
Place less value on concessions made by other simply because the
other party offered them
Managing perceptual and cognitive biases
Mood vs emotion

Chapter 7
Communication Model: conceptualizes communication as an activity that occurs
b/w 2 people, a sender and receiver
o Sender: thought/meaning in mind; encodes meaning to receiver
o Once encoded, message transmitter through medium
o Receiver gets transmission and decodes and interprets message
o Transactional model: captures bidirectional nature of 2-party negotiation
in ongoing conversations
Proves that communicator is not a passive recipient
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


COMMUNICATOR A: encode w/language, message in medium,
receive and interpret
COMMUNICATOR B: encode w/language, message in medium,
receive and interpret
o Communicator responding to a message has opportunity to choose how
to encode response and choose medium to use for transmission
Effective negotiators will consider strategic implications of choices
about communication channels rather than response in kind
o Feedback: nonverbal gesture, expressed emotion, rebuttal
Encoding: when a sender has a thought/meaning in mind, they translate that
meaning into a message to be transmitted to a receiver
Message distortions
o Individual communicators: each have goals and objectives, what they
want to accomplish
More diverse goals means greater likelihood of distortions and
errors in communication will occur
o Messages: symbolic forms by which info is communicated
More prone to symbolic communication, more likely that our
symbols wont accurately communicate intended meaning
o Encoding: messages are put into symbolic form
Distortions occur if sender encodes message in a way that impedes
understanding or accurate interpretation by recipient
o Channels and media: means through which info is sent and received
Verbal, nonverbal, symbolically? What should be conduit for its
transmission?
Complex message may need to be written rather than spoken so
recipient can absorb it at his/her own pace
Avoid face-to-face if in a noisy environment
Convey emotional appeal? Risk distortion when writing
Distortion when incongruence b/w multiple channels used @
same time
o Reception: comprehension; receiving messages in their form and
decoding into understandable form for recipient
Full translation may not be possible
Translators introduce possibility of addtl error into process
Interpretation: process of ascertaining meaning and significance of decoded
messages
o Facts, ideas, feelings, reactions or thoughts that exist w/in individuals act
as a set of filters for interpreting decoded messages
Feedback: important way to avoid problems in communication
o Inform sender that msg was received, encoded, and ascribed w/meaning
that sender intended
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


o Often used to improve understanding, but can be used strategically to
induce concessions, changes in strategy, or altered assessments of
process and outcome
Linguistic dimensions of making threats
o Use of polarized language: use positive words when speaking of your own
position and negative words when referring to other partys position
o Verbal immediacy: high-intended to engage other party; low-intended to
create a sense of distance/aloofness
o Language intensity: high-conveys strong feelings to recipient; low-
conveys weak feelings
o Lexical diversity: high levels denote comfort and competence
w/language; low levels denote discomfort, anxiety or inexperience
o High-power language style: low power denoted by use of hesitations,
politeness; high power denoted by verbal dominance, clarity, firmness
Dominant contributors to breakdowns and failures in negotiation
o Failures and distortions in perception, cognition, and communication are
the paramount contributors to breakdowns and failures in negotiation
Role of Questions: one of the main techniques available for improving
communication in negotiation
o 2 categories: those that are manageable and those that unmanageable
Manageable: May I ask a question? How much will this cost?
Unmanageable: Didnt you know that we couldnt afford this?
o Manage difficult/stalled negotiations; used to tactically pry or level a
negotiation out of a breakdown
How to phrase certain questions and certain situations
o Unblock negotiations by using why not questions instead of why
Help negotiators identify and understand the other partys
preferences
o Manageable
Open-ended: cant be answered w/yes or no; who, what, when
Open: invite the others thinking
Leading: point towards an answer
Cool: low emotionality
Planned: part of logical sequence of questions developed ahead
Treat: flatter opponent at same time you ask for info
Window: aid in looking into other persons mind
Directive: focus on a specific point
Gauging: ascertain how the other person feels
o Unmanageable
Close-out: force other party into seeing things your way
Loaded: put other party on spot, regardless of answer
Heated: high emotionality, trigger emotional responses
Impulse: spur of the moment, no planning, get off track
MGMT 439- Negotiation Exam 1 Study Guide
Fall 2014


Trick: appear to require frank answer, really loaded in meaning
Reflective trick: reflects other into agreeing w/your point of view