chapter 10 Flashcards
(10 cards)
What is negotiation, and what is its primary goal?
Negotiation is a process where two or more parties with different preferences work together to make a joint decision. The primary goal is to reach a mutually agreed-upon outcome that cannot be decided by one party alone.
How can decision-making in negotiations be more complicated than individual decision-making?
In negotiations, decisions involve multiple parties with different goals and preferences, requiring consideration of each party’s interests and outside options. Achieving a rational and mutually beneficial agreement often demands System 2 (analytical) thinking but can be influenced by System 1 (intuitive) biases.
What role does game theory play in negotiation?
Game theory is used to predict rational outcomes in negotiation by analyzing various strategies, possible outcomes, and utilities for each party. It helps identify the optimal behavior and conditions for agreements. However, it assumes all parties act rationally, which may not always be the case in real-world negotiations.
What is a Best Alternative to a Negotiated Agreement (BATNA)?
BATNA, or outside option, is the best alternative available to a party if no agreement is reached. It sets the minimum outcome a party would accept in a negotiation, known as the reservation point or indifference point.
What is the difference between positions and interests in negotiation?
Positions are the explicit demands or requests made by each party, while interests are the underlying motives behind those positions. Focusing on interests rather than positions helps negotiators understand each other’s true priorities, which can lead to more creative solutions.
What is a bargaining zone?
A bargaining zone exists when there is a range of outcomes that both parties would prefer over no deal. For instance, if a job candidate is willing to accept between $32,000 and $38,000, and the employer is also within that range, a mutually acceptable outcome can be reached.
How can value be created in negotiations involving multiple issues?
Value can be created by trading issues that are valued differently by each party, known as value-enhancing trade-offs. For example, one party might concede on price in exchange for a larger order quantity, which benefits both sides by increasing the overall value of the deal.
What are contingent contracts, and how can they be useful?
Contingent contracts are agreements that depend on future events. They allow parties to “bet” on differing predictions, helping overcome biases and preventing endless debate over uncertain outcomes. Examples include commission-based pay structures where bonuses are contingent on performance.
Why is building trust important in negotiation?
Trust encourages information sharing, which is crucial for identifying each party’s true preferences and potential trade-offs. Lack of trust can prevent effective communication and limit opportunities to create value.
What does it mean to make multiple offers simultaneously?
By presenting multiple options that are equally valuable, a negotiator demonstrates flexibility and willingness to accommodate the other party’s preferences. This strategy helps reveal which aspects are most important to the other side, guiding the negotiation toward mutually beneficial outcomes.
