1. Psych 253 Judgments and Decisions Negotiations
Negotiations and Conflict Resolution
Psych 253 Judgments and Decisions Negotiations
Barbara Mellers 1

2. Texoil
An independent service station in the Port of Los Angeles is for sale by owners (married couple)
Texoil, a large petroleum refining company, is a potential buyer (Texoil representative)
Parties have 5 minutes to prepare and 30 minutes to negotiate and discuss Texoil’s possible purchase of the service station
When you prepare, think about your BATNA, your reservation price, and your underlying INTERESTS!

3. Each Side’s Information
Texoil Rep.
Station Owner
BATNA
Reservation Price
Interests

4. Each Side’s Information
Texoil Rep.
Station Owner
BATNA
Reservation Price
Interests
$675,000
(Build one)
$400,000
(BP offer)

5. Each Side’s Information
Texoil Rep.
Station Owner
BATNA
Reservation Price
Interests
$675,000
(Build one)
$400,000
(BP offer)
$500,000
Why not $675K?
Minimart = $100K
Upgrades = $??
$553,000 ($488,000 after taxes)
Boat loan: $230,000
Boat ready: $68,000
Food, health, clothing: $75,000
Boat repairs: $40,000
Savings after return: $75,000

6. Each Side’s Information
Texoil Rep.
Station Owner
BATNA
Reservation Price
Interests
$675,000
(Build one)
$400,000
(BP offer)
$500,000
Why not $675K?
Minimart = $100K
Upgrades = $??
$553,000 ($488,000 after taxes)
Boat loan: $230,000
Boat ready: $68,000
Food, health, clothing: $75,000
Boat repairs: $40,000
Savings after return: $75,000
Time off (2 years)
Spouse’s health
Sail around the world
Savings / future income
Health insurance, food, etc.
Good price
Good managers
Station Ownership

7. Who reached an agreement?
What kind of information did you share?
What was the key to an agreement?

8. Initial Texoil Situation
Station Owner’s
Reservation Price
($553,000)
Texoil Rep’s
Reservation Price
($500,000)
400
450
500
550
600
650
700
700
BATNA
For Station Owner
(or, stay put)
Sale Price
(in thousands)
BATNA
For Texoil Rep

9. Sale Price (in thousands)
Revised Texoil Situation: If Texoil Representative includes Job Offer Upon Return
Station Owner’s
Reservation Price
($467,000)
Texoil Rep’s
Reservation Price
($500,000)
460
470
480
490
500
510
520
530
Sale Price (in thousands)

10. Characteristics of Integrative Bargaining
Multiple issues
Differing preferences, expectations, risk attitudes
Differing interests
Future relationship
Multiple alternatives

11. Distributive Integrative Bargaining Bargaining
One issue Many issues
Win-Lose Win-Win
Outcome Process and outcome
Max share of pie Max size and share of pie
One time Repeated times
One position Many options
Keep interests hidden Share interests
Keep information hidden Share information
Competitive Cooperative/Competitive
Position-based Interest-based

12. Distributive Integrative Bargaining Bargaining
TACTICS
Distributive Integrative Bargaining Bargaining
Analyze own & other’s interests
Analyze own & other’s priorities
Prepare multi-issue proposals
Think creatively about shared interests
Define your BATNA
Define your reservation price
Define your target level
Prepare objective rationales

13. Anchor with first offer Discuss single issue Make bi-lateral, not
Open high
Anchor with first offer
Discuss single issue
Make bi-lateral, not
unilateral concessions
Persuade through objective rationale
Cooperate
Build trust
Make package deals
Make multiple offers simultaneously
Ask for and share info about interests & priorities
In the negotiation itself, again these are very different types of bargaining. For distributive….for integrative…..
Now. These seem like two totally different types of bargaining – distributive and integrative bargaining – that are almost opposed to each other. So the question is, which is correct? Is it better to be a distributive or an integrative bargainer?
You should do both. In every negotiation situation, you should be simultaneously trying to enlarge the pie and to get the biggest slice of it.
You should prepare for both of these bargaining strategies, and you should be constantly trying to create value while you try to claim value.
You want to open high, anchor, make persuasive arguments for your positions, while at the same time you try to establish trust, cooperation, asking for and sharing information about interests.
It’s very possible to be both an integrative and distributive bargainer – to try to maximize both parties gains, but also to try to maximize your own gain.

14. Why did impasses occur?
Negotiators may have: Escalated commitment to positions Tried to win over all else Believed that the pie was fixed (other party’s interests are opposite yours) Had positive illusions and unrealistic aspirations Had negative views of opponent

15. Integrative Negotiation
Separate people from problem
Should you be a hard or soft negotiator?
Focus on interests, not positions
Generate multiple possibilities
Base results on objective standards

16. Advantages of Integrative Agreements
Improve outcomes
Create more stable agreements
Improve implementation
Strengthen the relationship

17. But..
The non-separability of integrative and distributive negotiations
“Value that has been created must be claimed”
Tactics that claim value can impede its creation
Persuading, withholding information
Approaches to creating value are vulnerable to claiming tactics
Disclosing interests, priorities

18. The Prisoner’s Dilemma
Your Partner
Not confess
Confess
2 yrs
0 yrs
You
10 yrs
5 yrs

19. The Negotiator's Dilemma
Your Counterpart
Create
Claim
Good
Great
You
Terrible
Mediocre

20. Resolving the Dilemma
Prepare for integrative and distributive opportunities
Analyze own & other’s interests; avoid fixed-pie perception
Know your BATNA, Res Price, objective arguments
Balance cooperation and competition
Build trust: don’t jump in trusting immediately, but be open to a trusting interaction
Ask for and share info about interests & priorities, but watch out for unilateral information exchange