In the distributive bargaining situation,
- The goals of one party are usually in fundamental and direct conflict with goals of the other party.
- Resources are fixed and limited.
- Both parties want to maximize their share.
Result in: - Each party will use a set of strategies to maximize his or her share of the out comes to be obtained.
Three Reasons that every negotiator should be familiar with distributive bargaining. - First, negotiators face some interdependent situations that are distributive, and to do well in them they need to understand how they work.
- Second, because many people use distributive bargaining strategies and tactics almost exclusively, all negotiators need to understand how to counter their effects.
- Third, every negotiation situation has the potential to require distributive bargaining skills when at the “claiming value” stage.
The Distributive Bargaining Situation
To better understand how the distributive bargaining process work, we need to understand the following terms: - Target Point: the point at which the negotiator would like to conclude negotiations - his optimal goal. (Also, call negotiator’s aspiration)
- Resistance Point: the price beyond which negotiator will not go or negotiator’s bottom line. (Also, call reservation price)
- Asking Price: is the initial price set by the seller. (might be counter by “initial offer”)
- Bargaining range, settlement range, or zone of potential agreement: is the spread between resistance points.
The Roles of Alternatives to a Negotiated Agreement - It is the fourth factor which may enter the negotiation.
- An alternative outcome that can be obtained by completing a deal with someone else.
- Give negotiators the power to walk away from any negotiation when the emerging deal is not very good.
- Negotiations need to ensure that they have a clear understanding of their best alternative to a negotiated agreement, or BATNA.
Settlement Point: - To reach settlement within a positive bargaining range.
- The objective of both parties is to obtain as much of the bargaining range as possible.
- To reach an agreement as close to the other party’s resistance point as possible.
- For agreement to occur, both parties must believe that the settlement, although perhaps less desirable than they would prefer, is the best that they can get.
Bargaining Mix - The package of issues for the negotiation is the bargaining mix. (Such as, the price, the closing date of the sale, renovation condo, and the price of items that could remain in the condo; drapes and appliances.
- Each item in the mix has its own starting, target, and resistance points.
- Some items are obvious importance to both parties; others are important only to one party.
Fundamental strategies:
The prime objective in distributive bargaining is to maximize the value of the current deal. - To push for settlement close to the seller’s (unknown) resistance points, thereby yielding the largest part of the settlement range for the buyer.
- To convince the seller to change her resistance point by influencing the seller’s beliefs about the value of the property (Such as, condo).
- If a negative settlement range exists, to convince the seller to reduce her resistance point to create a positive settlement range or to change his own resistance point to create an overlap.
- To convince the seller to believe that this settlement is the best that is possible – not that it is all she can get, or that she is incapable of getting more, or that the buyer is winning by getting more.
Two tasks are important in all distributive bargaining situations: - Discovering the Other Party’s resistance points: In formation is the life force of the negotiation. The more you can learn about the other party’s target, resistance point, motives, feeling of confidence, and so on, the more able you will be to strike a favourable agreement.
- Influencing the Other Party’s resistance point: is to locate the other party’s resistance point and relationship of that resistance point to your own.
Four major proposition that these factors can effect the process of distribution bargaining. - The higher the other party’s estimate of your cost of delay or impasse, the stronger the other party’s resistant point will be.
- The higher the other party’s estimate of his or her own cost of delay or impasses, the weaker the other party’s resistance point will be.
- The less the other party values an issue, the lower their resistance point will be.
- The more the other party believe that you value an issue, the lower their resistance.
Tactical Tasks
Assess the other party’s target, resistance point, and cost of terminating negotiation. - Indirect assessment: means determining what information an individual likely to used to set target and resistance points and how he or she interpreted this information.
- Direct Assessment: in the bargaining, the other party does not usually reveal accurate and precise information about his or her target, resistance points, and expectations, Sometimes, however, the other party will provide accurate information. When pushed to the absolute limited and in need of quick settlement, the other party may explain the facts quite clearly.
Manage the Other Party’s impressions: Negotiators need to screen in formation about their positions and to represent them as they would like the other to believe them. - Screening Activities
- Direct Action to alter Impressions
Modify the Other Party’s perceptions - To interpret for the other party what the outcomes of his or her proposal will really be.
- To modifying the other’s perceptions is to conceal information.
Manipulate the Actual Costs of Delay or Termination
There are 3 ways to manipulate the cost of delay in negotiation - Plan disruptive action
- Form an alliance with outsiders
- Manipulate the scheduling of negotiations
Position Taken during Negotiation
Effective distribution bargainers need to understand the process of taking positions during bargaining, including the importance of the opening offer and the opening stance, and the role of making concession throughout the negotiation process. - Opening Offer: What should the opening offer be? Will the offer be seen as too low or too high by the other negotiator and be contemptuously rejected?
- Opening Stance: Concern the stance or attitude to adopt during negotiation.
- Initial Concession: After the first round of offer, the next question is, what movement or concessions are to be made?
- Role of Concessions: If one side is not prepared to make concessions, the other side must capitulate or the negotiation will deadlock.
- Pattern of Concession Making
- Final Offers: The final offer has to be large enough to be dramatic yet not so large that it creates the suspicsion that the negotiator has been holding back nad there is more available on other issues in the bargaining mix.
Closing the Deal:
Choosing the best tactic for given negotiation is as much a matter of art as science. - Provide Alternatives: negotiators can provide two or three more alternative package for the other party that are more or less equivalent in value.
- Assume the close: Act as if the decision to purchase something has already been made so they might as well start to get the paperwork out of the way.
- Split the difference
- Exploding offers: An exploding offer contains an extreamly tight deadline in order to pressure the other party to agree quickly.
- Sweeteners: “I will give you X if you agree to the deal.”
Hardball tactics:
Such tactics are designed to pressure negotiators to do things they would not otherwise do, and their presence usually disguise the user’s adherence to a decidedly distributive bargaining approach.
Dealing with Typical hardball Tactics: - Ignore Them
- Discuss Them
- Respond in Kind
- Co-Opt the other Party
Typical Hardball Tactics: Included - Good Cop/Bad Cop
- Lowball/High Ball
- Bogey
- The Nibble
- Chicken
- Intimidation
- Aggressive Behaviour
- Snow Job
By: Chotipun Tubtimtong (MEE)
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