Faculty of Management and The Distributive Bargaining Situation

Finance
MBA 5222– Conflict and • Goals of one party are in fundamental, direct
Negotiation Management conflict to another party
• Resources are fixed and limited
Distributive Bargaining • Maximizing one’s own share of resources is
By the goal

Rajitha Silva

Bargaining Approaches
The Distributive Bargaining Situation
• Distributive bargaining
– The negotiation process is a win-lose exercise Preparation—set a
– Each party relies on its bargaining power
• Target point, aspiration point
• Mutual gain (win-win or interest-based)
• Walkaway, resistance point
bargaining
• Asking price, initial offer
– Both bargaining parties seek to satisfy each party’s
substantive interest
– Strengthens their relationship
 Good Faith Bargaining Other Bad Faith Bargaining
• Each party must demonstrate a sincere and • “Pleading Poverty”
honest intent to reach a labor agreement and • Totality of Conduct Doctrine’
be reasonable in their bargaining positions, • Boulwarism
tactics, and activities • Surface bargaining
• Totality of Conduct • Dilatory tactics
• Violations of Good Faith Bargaining • Imposing unreasonable conditions
• Types of Bargaining Issues (subjects) • Unilateral changes
• Commission of ULPs

The Distributive Bargaining The Role of Alternatives to a Negotiated

Situation Agreement
Party A - Seller
• Alternatives give the negotiator power to walk
Walkaway Point Target Point Asking Price away from the negotiation
– If alternatives are attractive, negotiators can:
• Set their goals higher
• Make fewer concessions
– If there are no attractive alternatives:
Initial Offer Target Point Walkaway Point • Negotiators have much less bargaining power

Party B - Buyer
 The Distributive Bargaining Fundamental Strategies
Situation • Push for settlement near opponent’s
Party A - Seller resistance point
Walkaway Point Target Point Asking Price
• Get the other party to change their resistance
Alternative point
• If settlement range is negative, either:
– Get the other side to change their resistance point
– Modify your own resistance point
Alternative
Initial Offer Target Point Walkaway Point • Convince the other party that the settlement
is the best possible
Party B - Buyer

Keys to the Strategies Tactical Tasks of Negotiators

The keys to implementing any of the four • Assess outcome values and the costs of
strategies are: termination for the other party
• Discovering the other party’s resistance • Manage the other party’s impressions
point • Modify the other party’s perceptions
• Influencing the other party’s resistance • Manipulate the actual costs of delay or
point termination
 Assess Outcome Values and the Costs of
Termination for the Other Party Manage the Other Party’s Impressions
• Indirectly
• Screen your behavior:
– Determine information opponent used to
set: – Say and do as little as possible
• Target
• Resistance points • Direct action to alter impressions
• Directly – Present facts that enhance one’s position
– Opponent reveals the information

Manipulate the Actual Costs of

Modify the Other Party’s Perceptions
Delay or Termination
• Make outcomes appear less attractive • Plan disruptive action
• Make the cost of obtaining goals appear – Raise the costs of delay to the other party
higher • Form an alliance with outsiders
• Make demands and positions appear more or – Involve (or threaten to involve) other parties
less attractive to the other party –whichever who can influence the outcome in your favor
suits your needs • Schedule manipulations
– One party is usually more vulnerable to
delaying than the other
 Positions Taken Positions Taken
During Negotiations During Negotiations
• Opening offer • The role of concessions
– Where will you start? – Without them, there is either capitulation or
• Opening stance deadlock
– What is your attitude? • Patterns of concession making
• Competitive? Moderate? – The pattern contains valuable information
• Initial concessions • Final offer (making a commitment)
– Should any be made? If so, how large? – “This is all I can do”

Commitments: Commitments:
Tactical Considerations Tactical Considerations
• Establishing a commitment • Ways to abandon a committed position
– Three properties:
– Plan a way out
• Finality
– Let it die silently
• Specificity
• Consequences – Restate the commitment in more general terms
• Preventing the other party from committing – Minimize the damage to the relationship if the
other backs off
prematurely
– Their commitment reduces your flexibility
 Closing the Deal Dealing with Typical
Hardball Tactics
• Provide alternatives (2 or 3 packages)
• Four main options:
• Assume the close
– Ignore them
• Split the difference
– Discuss them
• Exploding offers – Respond in kind
• Deal sweeteners – Co-opt the other party (befriend them)

Typical Hardball Tactics Typical Hardball Tactics

• Good Cop/Bad Cop • Intimidation
• Lowball/Highball • Aggressive Behavior
• Bogey (playing up an issue of little • Snow Job (overwhelm the other party
importance) with information)
• The Nibble (asking for a number of small
concessions to)
 Further Strategies and Tactics The Bargaining Power Model
• Using persuasive arguments and objective evidence • BP = OCD/CA
• Painting a picture of the loss or gain • Assumptions
• Presenting a bargaining proposal in writing – Both parties are rational and use the same approach to the
• Listening carefully for nonverbal cues costing of proposals
– Either party will accept the other party’s proposal if it costs
• Use of positive reinforcement that party more to disagree than to agree
• Linking issues (packaging multiple proposals)
• Factors Affecting Bargaining Power
• Matching proposals – Prevailing economic conditions
• Splitting the difference – Bargaining parties
– Governmental interventions

Factors Affecting Agreement and

Disagreement Costs
Ethical and Legal Considerations

• Union • Immoral or Unethical Behaviors

– Bribing opponents
– Financial Supplements
– Stealing opponents’ confidential information
– Public Aid
– Demeaning or humiliating opponents
• Management – Surreptitiously observing opponents
– External Competition Factors – Self-Dealing
– Company-Specific Factors • Conformance to Professional Standards by
• Intraorganizational Bargaining Negotiators