Lecture 7 Negotiation with applications to real estate Flashcards Preview

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Flashcards in Lecture 7 Negotiation with applications to real estate Deck (21)
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1
Q

When do negotiations occur?

A

When two (or more) parties try to reach a mutually beneficial agreement

2
Q

Backward induction

A

The process of reasoning backwards in time from the end of a problem or situation, to determine a sequence of optimal actions

3
Q

Why would you reject given money?

A
  • Preferences for fair (equal) outcomes
  • Reciprocity - punish unkind behavior
4
Q

BATNA

A

Best Alternative To a Negotiated Agreement
What is my best outcome if we fail to reach an agreement?

5
Q

What is the reservation point?

A

The point at which you are indifferent between agreement and impasse

6
Q

Why should you think of a BATNA?

A
  1. Lowers the risk of accidentally accepting a too low offer
  2. Lowers the risk of rejecting an offer that is above your BATNA, this often happens when emotions get in the way
7
Q

What are the components of negotiation?

A

Claiming Value & Creating Value

8
Q

Claiming Value

A

Bargaining zone - the zone between your and counterparty’s reservation point.
One issue negotiations

9
Q

Creating Value

A

Identifying and adding issues which are valued differently by different parties can create value during negotiating

10
Q

Zero-sum bias

A

When an individual thinks that one person’s gain would be another’s loss. Thinking it is all “value claiming” and ignoring “value creation”

11
Q

Reactive devaluation

A

Devalue any concession made simply because it is offered by an adversary - “if you are willing to offer this, it must be bad for me”

12
Q

Self-serving bias

A

Tendency to attribute successes to (internal) personal factors and failures to (external) situational factors beyond control
To conflate what is fair with what benefits oneself (and those around you) - definition often used in negotiation

13
Q

Does knowing about the self-serving bias help?

A

No

14
Q

Anchoring

A

People tend to be overly affected by an initial anchor, even if this anchor is normatively irrelevant, without realizing this effect

15
Q

When do we use anchoring?

A

When we actually don’t know what to bid, if we don’t know the initial value

16
Q

The scale-granularity account

A

precise numbers create a finer-grained mental scale that leads people to adjust away from the anchors in smaller steps [cognitive explanation]

17
Q

The attribution-of-competence account

A

Precise numbers suggest a more confident and competent counterpart [psychological inference]

18
Q

Should you always start bidding high and precise?

A

No, not if it is still open who you are negotiating with when setting your opening bid, you may be able to attract more interested parties by starting with a low price, who may find themselves in a bidding war leading to a higher price

19
Q

Is underpricing always a bad idea, even in competative markets

A

YES

20
Q

What is a reason for not going precise?

A

If people are likely to bid more than you ask, you do not want them to anchor

21
Q

How does contribution affect the claims?

A

Positive contributions drive initial claims
Negative contributions drive concessions