• Judgment in Managerial Decision Making 8e

    Chapter 10
    Making Rational Decisions in Negotiations

  • Game Theoretic Approaches
  • Provides precise prescriptive advice
  • Relies on describing all outcomes
  • Assumes all parties are rational
  • A Decision-Analytic Approach to Negotiation
  • Describes the behavior of counterparts
  • Prescribes advice from counterpart behavior
  • Analytical framework

–Alternatives to negotiated agreement

–Each party’s set of interests

–Relative important of interests

  • Alternative to a Negotiated Agreement
  • Best Alternative to Negotiated Agreement
  • Reservation point
  • Many accept offers below BATNA
  • The Interests of the Parties
  • Identifying counterpart interests is key
  • Focusing on deeper interests
  • Understanding the importance of issues
  • Claiming Value in Negotiation

A new MBA is being recruited for a highly specialized position. The organization and the employee have agreed on all issues except salary. The organization has offered $90,000, and the employee has counteroffered $100,000. Both sides believe they have made fair offers, but they both would very much like to reach an agreement. The student, while not verbalizing this infor­mation, would be willing to take any offer over $93,000 rather than lose the offer. The organization, while not verbalizing this information, would be willing to pay up to $97,000 rather than lose the candidate.

  • Creating Value in Negotiation
  • Many negotiations involve multiple issues
  • Value creation

–1978 Camp David Accords

–Trading on issues to create value

–Creating value through bets

  • Build on differences
  • Mange biases
  • Diagnose disingenuous parties
  • Establish performance incentives
  • The Tools of Value Creation
  • Build trust and share information
  • Ask questions
  • Strategically disclose information
  • Negotiate multiple issues simultaneously
  • Make multiple offers simultaneously
  • Search for post-settlement settlements
  • Key Preparation Questions
  • What is your BATNA?
  • What are the issues?
  • How important is each issue?
  • What is your counterpart’s BATNA?
  • Are there value creation opportunities?
  • Is there disagreement about predictions?
  • How will you obtain information?

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