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Flashcards

Negotiation

Benjamin Ander German 38 cards

Cards in this deck (38)

  1. 1Preparing for a negotiationInformation scenario & Valuation Scenario
  2. 2Information Scenario1.) Finding Price seller is indifferent + max. price buyer
    2.) Many ? if little information
    3.) More efficient markets, less ?
  3. 3Valuation Scenario1.) Independent Private Values (IPV)
    2.) Common Value (CV)
    *Mom Bday and Job Google
  4. 4Moderate Offer + Downside= acceptable and should arrive deal quick
    1.) Leaving money on table
    2.) Other party may become greedier
    3.) Leaves little bargaining room
    4.) Creates asymmetry against us
  5. 5Boulwarian Offer + DownsideFacts + Logic = "Fair" Price, "take of leave"
    1.) Process perceived as unfair
    2.) May show weakness because hurry
    3.) "Fair" depends on information
    4.) Excessive rigidity
  6. 6Extreme OfferLoss of credibility.
    Will be recognized as insincere.
    Politicians have to manage relation and public image.
  7. 7Tough offer + reactionMost efficient!
    Must be in Fuzzy Range
    Reaction: "no, but discussable"
    React with similar tough offer
  8. 8Who moves first?Normally buyer.
    Information?
    No -> opening offer reveals critical info
    Yes -> opportunity to anchor if 1) opponent is ill-informed/confused 2) we have area of expertise
  9. 9Reaction Boulwarian Offer?1.) Stroke Ego (appreciate realistic proposal, don't like bazaar style either)
    2. No counteroffer
    3. Check facts and call experts
  10. 10Reaction extrem offer? And MISTAKES1. "will not negotiate like this"
    2. try and reverse situation
    3. counter with humor
    4. answer with questions
    5. apply silent treatment
    Mistakes: don't let other side anchor and no emotional reaction
  11. 11Concession Patterns - OBJECTIVESObjectives: Probing (find RP) and signaling (manage opponent's belief about our own RP)
  12. 12Concession patterns RULES1) Move in increasingly smaller steps
    2) Move towards greater precision
    3) Think longer and ask more questions
    4) labelled as tentative can't be withdrawn
    5) give counterpart target to shoot by telling him what he cannot get
  13. 13Tit for TatStart with cooperation and defect as soon as other party defects
  14. 14Successful Strategies1) are nice (never defect first)
    2) provocable (unanswered defection, tend to invite further defections -> retaliate)
    3) forgiving (cooperate after other defected)
    4) clear (don't be too tricky/clever)
  15. 15Problems Tit for Tat1) Envy: try to do well without looking at partners profit
    2) noise: less provocable and more forgiving
    3) Grey area between cooperation and conflict (specify threshold level, vary intensity and randomize intensity)
  16. 16General Rules (Game Theory)1) Never defect first
    2) Respond to observed behavior
    3) Always respond
    4) Respond mildly
    5) Maintain some uncertainty
    6) Resume cooperation as soon as other does
    7) Make peace if D-D spiral
  17. 17Dimensions in making a deal1) create value: if you can increase pie, you can extract more
    2) claim value: make sure you claim significant part of created value
  18. 18Pareto Frontier (package deals)Shows all combinations of outcomes between supplier and client.
    If you are on Pareto Frontier, you are maximizing win-win situation.
  19. 19Package DealsIdentify and take advantage of non-controversial issues
    Controversial issues: create agenda with multiple issues, propose mini-packages and take advantage of favorable efficiency ratios
  20. 20Internal NegotiationsUsing royalties (better on revenues) to extract information.
    Internal prices should be equal to marginal cost.
    Level of protection won't increase total profits.
  21. 21MFCCMost favored customer clause: guarantee customer the best price the company gives to anyone
  22. 22MCCMeet competition clause: I charge you XY, but if you get any other lower price, I will compensate difference
  23. 23Benchmark pricingPrice given by industry price index.
  24. 24Dealstructure competitive effectsMCC, MFCC, Benchmarking: pay attention in competitive effects - in competitive industry you want to negotiate deals that create comp. advantage
  25. 25Commisioner Daniels1.) Give information that makes them change prior beliefs: "we had difficult negos in past, but always able to reach agreement. I am sure we find solution with global package
    2.) What is your proposal??
  26. 26How does repetition affect cooperation?1) Fear of retaliation
    2) Escalation of conflicts often emerge
    3) Increased transparency about payoffs makes it more difficult
    4) Routine
  27. 27Colgate / Palmolive: Steps1) "NO", extreme positions
    2) Facts + arguments = solution, but arguments do not convince, irritate and throw away information
    3) "a friendly word of advice": threatening
    4) Teach them a lesson: punishment
    5) 50/50 solution inefficient
  28. 28ArgumentsDo not convince
    Irritate
    Create resistance
    Throw away information
    Don't listen
  29. 29How to avoid escalation in conflict?1) multiple issues
    2) ask questions
    3) do not lose credibility (do not lie or make extreme offers)
    4) manage negotiation by using golden rule: tough on issues, soft on people
  30. 30How to make an offer?1) not one issue
    2) no closed questions
    3) no strong language
    4) not too many arguments
    5) "our" not selfish
    6) flexibility
  31. 31How to make an offer? 4 step procedure1) Give non specific way: more flexible on other issues
    2) take specific way
    3) occupatio: I understand this involve cost for you and you need compensation
    4) Probing: how should we do that?
  32. 32Mastering Process Fundamentals. When trust people?Dogmatic approach: B has incentive to play down. So go up as A.
    Alternative Approach: Go down as A and show trustful behavior. (Thank you from B)
  33. 33Types in Trust People Game?Down Up: Nice (Exceutives!)
    Down Down: Machiavellians
    Up Up: Martyrs
    Up Down: Economists (MBAs!)
  34. 34English Auction- start late to not show interest
    - smallest possible increment (only to scare off amateurs)
    - against rational people: small increments
    - against emotional people: jumps to scare
    - stop when RP reached or everyone stops
    - expected price: v2
  35. 35Dutch Auction- Stopping: tradeoff between amount of money you make and probability of winning
    - expected price: V1 - "something"
  36. 36First-Price sealed-bid- trade off: amount of money you make and probability of winning
    - expected price: v1-"something"
  37. 37Second price sealed bid- bid your RP
    - Expected price: v2
  38. 38—

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Flashcards on Negotiation, created by Benjamin Ander on 20/11/2016.
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Benjamin Ander
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