Day 6

Complex Integrative Negotiations

Complex Integrative
Agreements

Make a proposal incorporating all issues

Make multiple equivalent offers simultaneously
Ask what is wrong with your proposal
Ask diagnostic questions and listen; dont argue
Build trust and be cooperative share integrative
information (do not disclose your reservation price)
Trade off when there are differences in preferences
Be firm on interests, but open to options
Try post-settlement settlements

Runs & Financing Trade-off

WCHI/
Outcome Hollyville
A
B
C

Price

1.49/0.89 $46,000
1.5/2.5 $55,000
3.0/1.0 $40,000

#Runs
6
8
8

Financing
25% Y(0)
25% Y(1-3)
100% Y(0)
100% Y(0)

Advanced Methods for

Uncovering Interests/Positions
MESO Multiple Equivalent Simultaneous
Offers
Contingency Contracts

Benefits of Making Multiple

Equivalent Simultaneous Offers
Anchor and re-anchor the negotiation
Gather information from the other side about
relative priorities
Help unskilled negotiators
Be aggressive and persistent while signaling
cooperation
Test what the other side is telling you
Make concessions that are cheap for you
Highlight your own value added
Control the process of the negotiation

Concerns about MESOs

Giving away information

Takes time
Becoming attached to your proposals
Danger of cherry-picking

Adding Juniors

WCHI/
Outcome Hollyville
A
B
C
D
E

1.49/0.89
1.5/2.5
3.0/1.0
2.0/3.0
3.5/1.5

Price

#Runs

$46,000
$55,000
$40,000
$55,000
$40,000

6
8
8
8
8

Financing
Other
25% Y(0)
25% Y(1-3)
100% Y(0)
100% Y(0)
100% Y(0) Juniors ($15K)
100% Y(0) Juniors ($15K)

Betting on Differences in
Expectations
The Problem

Different expectations of future ratings

Ratings
2-3
3-4
4-5
5-6
6-7

WCHI
20%
50%
10%
10%
10%

Likelihood
HOLLYVILLE
10%
10%
10%
50%
20%

Betting on Differences in
Expectations
The Problem

Different expectations of future ratings

Ratings
2-3
3-4
4-5
5-6
6-7

The Solution

WCHI
20%
50%
10%
10%
10%

Likelihood
HOLLYVILLE
10%
10%
10%
50%
20%

Bet on different expectations

If ratings are < 4, WCHI receives $1M rebate from Hollyville
If ratings are > 5, WCHI pays $1M surcharge to Hollyville

Expected
Value

WCHI
Hollyville

.7($1M) + .1($0) + .2(-$1M) = $500,000

.2($-1M) + .1($0) + .7($1M) = $500,000

Contingency Contracts
Build on differences. Dont argue over the
future, bet on it
Allow negotiators to spread risk through risksharing
Allow negotiators to solve problems of trust
without confrontation
Increase the incentive of parties to perform at
or above contractually specified levels
Great lie-detection device diagnose honesty

Structural Features of Successful

Contingent Contracts
Require continued interaction between parties
Require enforceability
Require clarity and measurability
But, be careful of contingency contracts when
You cant afford to lose
Other side has more information than you
There is no objective measure of what happened

Capitalizing on Differences in
Parties Preferences
Differences in priorities (logrolling)
Differences in the assessments of the probability
of future events
Differences in risk preferences
Differences in time preferences
Trade off on differences: when the other side
cares more about something than you do, you
want them to have it, but at a price

Negotiation in Teams
Advantages
Higher Joint Gains
Perceived Power

Disadvantages
Coordination loss
Risky shift

Types of Intragroup Conflict (Jehn

& Benersky)
Type of conflict is based on what it is about,
not the level of emotion involved
Task conflicts
Relationship conflicts
Process Conflict

Task Conflict
Increases performance/creativity (at
moderate levels)
More divergent viewpoints
More critical evaluation of alternatives
More communication & problem solving
More task focus
Greater sense of challenge increases effort

Reduces satisfaction and consensus

Increases anxiety and tension

Relationship Conflict
Reduces performance/creativity
Distraction, misspent time/effort
Limits cognition
Decreases access to new information
Group process focused on resolving or retaliating

Reduces satisfaction and consensus

Decreases commitment
Decreases cooperation & goodwill

Process Conflict
Sometimes increases performance/creativity
Increases evaluation of processes and standards
Increases appropriateness of task and resource
assignments

Mostly reduces satisfaction and consensus

Increases claim and blame perspective
Feelings of personal attack
Unfairness and inequity primed

Negotiation in Teams
Key ingredients for success
Skill mix
Shared understanding/Norms
Trust

Techniques for improving team

outcomes
Prepare prepare prepare
Agree on Substance:
Assure firm agreement interests and priorities
that underlie BATNA, RP, & Targets
Agree on information that can/should be
revealed and what should not

Determine Roles
Skill and ability assessment

Plan the process

Use Caucuses or recess strategically

Working as a team can be particularly

beneficial in the following situations:
1.The negotiation is complex, requiring a diverse
set of knowledge, abilities, or expertise.
2.The negotiation has great potential for creative,
integrative solutions.
3.Diverse constituencies and interests must be
represented at the table, as in union negotiations.

Working as a team can be particularly

beneficial in the following situations:
4. You want to display your strength to the other side, for
example, in international contexts where teams are
expected.
5. You want to signal to the other side that you take the
negotiation very seriously, as in a merger or acquisition.
6. You trust and respect available team members
7. You have sufficient time to organize and coordinate a
team effort.

Negotiator Toolbox: Integrative

Negotiation Strategies

Prepare a scoring system

Analyze issues, BATNAs, and reservation prices - think about

interests underlying positions

Use the negotiations to collect information about integrative

possibilities

Make a proposal incorporating all issues

Make multiple equivalent offers simultaneously
Ask what is wrong with your proposal
Ask diagnostic questions and listen; dont argue
Build trust and be cooperative share integrative information (do not
disclose your reservation price)
Trade off when there are differences in preferences
Be firm on interests, but open to options
Try post-settlement settlements

Negotiator Toolbox: Integrative

Negotiations Strategies Continued
Build on differences
Fractionate/Add issues
Trade issues with different priorities
Use contingent contracts

Test the truth

Multiple equivalent offers simultaneously
Contingent contracts

Create an atmosphere for problem-solving