Chapter 2: Preparation- What to do Before Negotiation

Question 1

Most negotiators believe whatever is good for one party must be bad for the counterparty. What perception is this?

Answer 1

Fixed-Pie Perception (bad perception)

Question 2

People with this fixed-pie perception take one of three mindsets when preparing for a negotiation:
1. Resign themselves to ______ to the counterparty.
2. Prepare for ______ _______ with the counterparty.
3. ________ in an attempt to reach a _______ between opposing demands.

Answer 2

1. capitulating (being over-cooperative)
2. hard bargaining (being aggressive)
3. compromise; midpoint

Question 3

T or F: It is commonly assumed that concessions are necessary by one or both parties to reach an agreement.

Answer 3

True

Question 4

T or F: The fixed-pie perception is almost always right and often leads to an effective approach to negotiations.

Answer 4

False; almost always WRONG and often leads to an INeffective approach to negotiations

Question 5

A more accurate model of negotiation is to approach it as a _____-______ ______-______ enterprise involving both _______ and ________.

Answer 5

mixed-motive decision-making; cooperation; competition

Question 6

Effective preparation for a negotiation encompasses three general abilities (3 general areas of preparation are):

Answer 6

1. Self-assessment
2. Perspective-taking
3. Situational awareness (emotional intelligence)

Question 7

Self-Assessment: Identifying your ideal outcome may sound straightforward, but three major problems often arise:

Answer 7

1. Under aspiring negotiator (the Winner’s Curse) (just not being very effective)
2. Over aspiring or positional negotiator (being too effective and losing the deal)
3. The grass-is-greener negotiator

Question 8

What does BATNA stand for?

Answer 8

Best Alternative To a Negotiated Agreement

Question 9

BATNAs are not wishful, they are _______.

Answer 9

factual

Question 10

Your BATNA is ______ _______.

Answer 10

time sensitive (meaning it can change)

side note: Do not let the other party manipulate your BATNA.

Question 11

T or F: Negotiators should be willing to accept any set of terms superior to their BATNA. (you should be willing to accept terms that are better than your best option)

Answer 11

True

Question 12

the quantification of your BATNA

Answer 12

reservation point

(the trigger for your BATNA; the first domino that falls to your alternative option)

Question 13

You can determine your reservation point, or the quantification of your BATNA, with respect to other alternatives by the following 4 steps:

Answer 13

1. Brainstorm your alternatives.
2. Evaluate and order each alternative’s value.
3. Attempt to improve your BATNA.
4. Determine your reservation price based on facts.

Question 14

When determining your reservation point, be aware and knowledgeable of the following 2 things:
1. Beware of _____ _______.
2. Do not confuse your ______ _____ with your reservation point.

Answer 14

1. Beware of sunk costs (sunk costs = things you can’t get back. (ex: money back)) (KNOW THIS)
2. target point (they should be different numbers) (KNOW THIS)

Question 15

Most people are risk-(seeking/averse) when it comes to losses, and risk-(seeking/averse) when it comes to gains.

Answer 15

seeking; averse

(Reference points define what people consider to be a gain or a loss.)

Question 16

Assess Your Risk Propensity– In any negotiation, negotiators should consider the differential impact of 3 sources of risk:

Answer 16

1. Strategic risk
2. BATNA risk
3. Contractual risk

Question 17

refers to the riskiness of the tactics that negotiators use at the bargaining table.

Answer 17

strategic risk

Question 18

BATNA Risk: given BATNA’s of equal expected value, the more risk-averse (conservative) negotiator will be in a (stronger/weaker) bargaining position.

Answer 18

weaker

(Caution creates a weak position)

Question 19

refers to the risk associated with the willingness of the other party to honor its terms.

Answer 19

contractual risk

(is the other party going to honor its terms… ex: insurance companies going through loopholes to get out of insuring people’s houses burned down in the California fires)

Question 20

Differences in negotiators’ reference points may lead buyers and sellers to have different ________ for the same object.

Answer 20

valuations

Question 21

Someone who possesses an object has a reference point that reflects his or her current _______, or private valuation, of the object.

Answer 21

endowment

(if I own something, I think it’s worth more than the market value. (ex: going on Kelly BlueBook, seeing what your car is worth, and then thinking since you own the car it’s worth more). Important to know → the car’s worth what the car’s worth, not what you think it’s worth.

Question 22

T or F: The difference between what sellers demand and what buyers are willing to pay is a manifestation of loss-aversion.

Answer 22

True

Question 23

An important component in determining whether a person experiences regret is ________ ________, or “what might have been”.

Answer 23

counterfactual thinking

Question 24

In negotiation, ______ ______ of a first offer by the counterparty often means a better outcome for the proposing negotiator, but the outcome is less _______.

Answer 24

immediate acceptance; satisfying

Question 25

Often, negotiators’ probability judgements for certain types of events occurring are more _________ than is warranted.

Answer 25

optimistic

Question 26

a negotiator’s unwarranted level of confidence in the judgement of their abilities and the likelihood of positive events.

Answer 26

the overconfidence effect (This effect also causes people to underestimate the likelihood of negative events; when we find ourselves highly confident of a particular outcome, it is important to examine why we feel this way.)

Question 27

Perspective Taking-- Once a negotiator has thought about their own BATNA, reservation point, target point, and interests, it is time to identify information about the other negotiating parties (4):

Answer 27

1. Who are the counterparties? 2. Are the parties monolithic? 3. Identify counterparty’s interests and positions = discovery ** 4. Research the counterparties’ BATNA’s.

Question 28

Taking into consideration the other person’s side/perspective.

Answer 28

perspective taking

Question 29

T or F: don’t tell people what your BATNA or reservation price is in a negotiation.

Answer 29

True

Question 30

Situational Awareness-- Research related to the details of a negotiation situation is also critical to a successful negotiation outcome. 5 Questions to Research:

Answer 30

1. Is the negotiation one short, long term, or repetitive? 2. Is the negotiation a transaction or dispute situation? 3. Are linkage effects present? 4. Are the negotiations public or private? 5. Is third-party intervention a possibility?

Question 31

T or F: All negotiations have time-related costs.

Answer 31

True

Question 32

T or F: Two negotiators may face radically different time-related costs, but a deadline for one is a deadline for the other.

Answer 32

True (the sooner deadline = the deadline for both parties. (whoever's is first, the other has to adapt to that one)

Question 33

The rate of concessions made by negotiators (increases/decreases) as negotiators approach final deadlines.

Answer 33

increases

Question 34

T or F: Setting a final deadline on the negotiations can be helpful, especially if the passage of time is particularly costly for the negotiator. (always good to set a deadline upfront)

Answer 34

True

Question 35

Additional questions for situation-assessment include: 1. Is the negotiation agreement ______ or based on an ______ handshake agreement? 2. Will the negotiation meeting occur ______ or offsite? 3. Will the negotiation take place in the ______ ______ or behind closed doors? 4. What _______ and _______ will dictate how the negotiation process unfolds? 5. Will there be a single-option offered or ______ ______ to the counterparty?

Answer 35

1. formal/informal 2. onsite 3. public eye 4. norms; conventions 5. multiple offers

Question 36

T or F: Effective preparation is a strategic advantage at the bargaining table.

Answer 36

True

Question 37

T or F: A negotiator who has adequately researched the counterparty’s BATNA and interests is less likely to be manipulated or confused by the other party.

Answer 37

True