1. By Carolina Eder Annalena Koehler Anton Hristov Vilhelm Öhrn

2.  Everyone uses negotiation in day to day life.  Negotiation is a process in which a group or involved parties resolve matters, by discussing and coming to an agreement.

3.  To analyze negotiation rationally the negotiator has to understand the psychological forces which have a big impact on the negotiator´s effectiveness.

4.  Structure problems  Processes information  Frame the situation

5.  Situation adapted from Russo and Schoemaker  Difference between the two situations  Actually for both it should be worth it to invest the same amount of time  First Scenario – Very Good deal  Second Scenario – Not that attractive ◦ Frame represents percentage of discount

6.  Situation Richard Thaler  Content  In both versions, the result is the same.  No negotiation with the seller  Percentage of elasticity of the demand of the product  Frame – high cost is expected at hotel  High cost is considered “rip-off” in the store

7.  Those two examples show how important framing is to solve problems and make Decisions

8.  Framing potential gains or potential losses  Framed either as “gains” or “losses” ◦ Gains of similar value – prefer certainty over lottery ◦ Losses of sim. Value – prefer lottery over certainty  Example : $3500 gain considered a loss ◦ Personal goal was a $5000 increase ◦ Frame based on available information  (info not known – average raise = $2000)

9.  Crucial in forming the Frame ◦ Basis for evaluating if option is a gain or loss ◦ Determine our willingness to accept/reject an option ◦ It is a result of our expectations ◦ Usually what we own is our automatic reference point

10.  “Buyer” and “Seller” have different reference points ◦ Seller – personal attachment to the object he owns ◦ Values this attachment, therefore puts higher value ◦ Buyer is not attached, he estimates a lower value for an object  Ex: Coffee Mug priced from $.50 to $.9.50 ◦ Sellers - $7.12 ◦ Buyer – $2.88 (closer to market value) ◦ Chooser - $3.12 (get $ or mug, no buying/selling)

11.  Strategically manipulate framing to direct negotiation performance  Framing the options in terms of potential gain ◦ Situation perceived as more favorable  Same option Framed in terms of losses ◦ Lower chance of a favorable perception