1. Copyright 2006 Dwight Golann

2. Positional bargaining
Styles are similar across cultures
Positional “dancing” is normal, often expected
Reciprocity is key
But it can be abrasive/unproductive, esp. in disputes
Have to learn how to do it, or to deal with it
If you are uncomfortable with a “fake” position:
Respect your own style, but consider context
Option: Negotiate for a client, and adopt their goals
Reciprocity is key
eg, exchange of gifts at start of Jovanovich’s negotiation for HBJ with Smith and Genl Cinema
- Constant reciprocity even in personal and mundane negos.
- Pure coop and sacrifice are unusual
- Tendency in US and other western cultures to make some items “non- negotiable” EG: price tags
Personal style issues:
- Compare Steve Ross (circle plane until won hand) with Larry King (Ted Turner calls: OK; bypasses agent, but OK w/Larry) -
Copyright 2007 Dwight Golann

3. Impact of the first offers:
Set the outer limit of the bargaining range
Signal what each side expects
Affects your aspirations
Affects other side’s expectations
Compromise is usually expected: Allow for this
Copyright 2007 Dwight Golann

4. How to decide on a first offer?
Ask questions first
Estimate their goals and style
Build in a reasonable margin for error
Possible to use “shadow” bargaining
If you are fairly confident, advantage to going first
If not, advantage to going second. To do this, delay, e.g. by asking questions
Helps to have a rationale for your offer
Copyright 2007 Dwight Golann

5. Problem with “extreme” first offers
More is usually better, but if the offer is too extreme:
- May be ignored – they can ask you to bid again at a more reasonable level
- May discourage them from continuing
- May anger them
- Makes it hard to move to a “reasonable” point
Copyright 2007 Dwight Golann

6. Copyright 2007 Dwight Golann
Managing the “Dance”
Reciprocity is expected, so expect to receive and make counter-offers
Every offer is a message:
You can let it speak for itself (but ask: what will they think it means?)
Or, you can explain it
Copyright 2007 Dwight Golann

7. Copyright 2007 Dwight Golann
How to signal endgame?
More time between moves
Smaller moves
More specific, reasonable rationales
More precise terms
Doubtful or annoyed demeanor
Claim of lack of authority
Copyright 2007 Dwight Golann

8. Copyright 2007 Dwight Golann
Final moves
Split the difference?
Often expected
But penalizes earlier reasonableness
Other options:
- ‘Shadow’ concession (“I might recommend…”)
- Prepare something you can give away
- Tease out their intentions and hold firm
- Change the process
Copyright 2007 Dwight Golann

9. Copyright 2007 Dwight Golann

10. Impact of Alternatives
Issues: Define bargaining range, then divide it
Alternatives should define the bargaining range
Your Best Alternative To a Negotiated Agreement (BATNA) is your “walkaway point” or “bottom line”
Your opponent’s BATNA is same for them
The bargaining range is:
My BATNA Your BATNA
o o
← Bargaining Range →

11. What is a BATNA? In litigation: Go to trial?
Fight until one side quits?
Mediation or other ADR process?
In transactions:
Find a new partner?
Change the deal?

12. Concept of “BATNA” can mislead
Unless your BATNA is certain, it must be discounted for risk
If, e.g., the best result at trial would be $1 million, and you have a chance of winning
The real value of claim is $500,000
Less the cost and aggravation of going to trial
Less the risk of reversal on appeal
The more relevant question: What is my most likely alternative discounting for risk and cost?
Copyright 2007 Dwight Golann

13. Reservation ‘Price’ vs. BATNA
Reservation price/point is subjective
Related to BATNA, but not identical
Affected by:
Your personal preference for this result v. alternative
The likelihood the BATNA will occur
Personal willingness (or aversion) to taking on risk
Transaction costs (attorneys’ fees, etc.)
Value of time (present vs. future payment)
Impact on other opportunities

14. Effects of BATNA on tactics
Listen for information, don’t give it out
Wait before making an offer
Negotiation happens on three levels:
over the process (who makes first offer)
over information (alternatives?)
and then over the outcome
BATNAs can change: Work to improve yours/lessen theirs
Consider asking about BATNA

15. BATNA assessments change…
People must assess or predict their BATNAs
New info or developments can change a BATNA
You can affect perceptions and predictions
Your goals:
Acquire information to better assess both sides’ BATNAs
Make your BATNA appear better, theirs worse

16. ‘WATNAs” are important too
“WATNA”: The Worst Alternative to an Agreement
Fear of WATNAs, even if unlikely, also drives strategy
Negotiator’s BATNA and WATNA may be different from the client’s

17. Copyright 2007 Dwight Golann
Settle for More or Less
Copyright 2007 Dwight Golann

18. Goals and expectations
Set a high goal
You mentally concede anything short of it
Higher goals bring better results
Your goal should equal the highest legitimate expectation you can form
Be specific; have a clear target
Commit in writing or to an associate
Set a bottom line, but don’t focus on it
Don’t limit your goals to money
Examples:
- Morita of SONY, refusing to supply Bulova brand with his little radio
- Cheshire cat: If you don’t know where you’re going, any way will do
Expectation:
- A considered judgment about what we can and ought reasonably to achieve.
- Gives weight and conviction to your statements at the table
Why important?
- Goals set the upper limit on what we can achieve: above that is conceded
- Releast striving mechanism
Bottom lines:
- Useful; need to have one. It’s the minimum you’ll take
- But focusing on it is dangerous. Hard to focus on more than one thing in tense, complex situation. Bottom line may become the goal
- Keep it in mind and focus as you reach end point, if necessary I
Copyright 2006 Dwight Golann

19. Copyright 2006 Dwight Golann
Some caveats:
Goal must be defensible
Prepare reasons for your choice
Convince yourself it’s legitimate
Parties’ goals often conflict. If so,
Listen to their reasons
If necessary fall back to next-best defensible result
Be wary of “escalation”: abandoning a goal in heat of competition
Copyright 2006 Dwight Golann

20. What influences bargainers to move?
Reciprocity
Belief other will not move
Belief that one’s alternative is poor
Unwillingness to take risk
Persuasion by a principle
Copyright 2007 Dwight Golann

21. What prompts them to stop?
No reciprocity by other side
Exceed cost / drop below value of alternative
Anger over “wrong” or “unfair” tactics
Tactic to pressure other side; may be a miscalculation
Copyright 2007 Dwight Golann

22. Alternatives to positions?
It is very hard to avoid completely
Possible if:
- There is a very good relationship
- You have great power or credibility
- The bargaining culture supports it
More likely option: Add principled or interest-based elements, and so diminish importance of positional tactics
Copyright 2007 Dwight Golann

23. Copyright 2007 Dwight Golann

24. What is “principled” bargaining?
Stating a reason or facts instead of, or before, a position
“We have a standard multiplier for…” or
“Let’s look at a model clause”
Asking for the principles or facts behind a position
Showing a willingness to change in response to new information
“If you can document that, I’d consider..”

25. Impact of principles Principles are important
They influence both us and opponents
We want to be, and appear, consistent
Principles are useful
Legitimize your position
Minimize emotional reactions
Substitute for relying on alternative
Give basis for asking for information
Allow moving w/o slippery slope

26. What standards in Settle?
$ $ $ $ $ $ $ $
What Quarry is willing to pay: $600K
Former FMV $560K
Current FMV $450K
$420K Branam’s viewof tax assessment
$400K Quarry’s view of tax assessment
$200K what Branam would accept