DISTRIBUTIVE BARGAINING/COMPETITIVE
BARGAINING
Dorcas Bungei
092sis06
Table of contents
Introduction
Definition & CB
Strategy, Rules and Process
Common ploys and tactics
General theory
1st offer, Aspirations, Time costs and
deadlines
Behavioral forecasting
Definition
Distributive bargaining(claiming value/zero
sum/win lose/competitive )is negotiation that is
aimed at obtaining as much value of a fixed
resource as possible from the negotiating
opposite e.g. money
 Perceives that it is only possible if the other side
foregoes it.
 It is adversarial.
Examples: attorneys settling litigation, garage
sales, labor laws, representative bargaining,
international relations etc.
Reasons
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When:
Adversarial relationship – no trust
Bargaining power advantage - can dominate
Perceives an opportunity for gain at the expense of the
other party
Other party appears susceptible to competitive tactics
Defending against competitive moves
No concern for the future relationship
Strategy , Rules and Process
Objective: to understand how the other party
is negotiating so as to respond appropriately.
Either i)negotiate defensively so as not to be
taken ii) take initiative to change the character
of the negotiations
Strategy and process
• Interplay between opponents’ walk away values.
• negotiate an outcome that is closer to your own
goals then theirs. Know reservation price,
aspirations and potential bargaining zone.
• bargaining power :clarity of one’s goals,
alternatives, and walk away values and how much
one knows about your opponents'
• Use of strategy, tactics and rules.
• Basic hard bargaining strategy namely: high
demand, small concessions, firmness
Rules/
Operating assumptions
Persuade the party that they cannot settle/above
a certain point using the following rules:
• Negotiations' an information game: gather info.
• Opening position at the margins: high/low offer
and small concessions
• Hang tough on concessions: don’t make
concessions one on one or equally. Use different
value scale (mislead to misvalue).
Contd..
• Small, infrequent and declining concessions:
message: not much to give
• Midpoint rule other party first or, start with
an extreme offer.
• Link positions to convincing justifications and
rationales.
Common ploys and tactics:
• Tactics are psychological maneuvers designed
to influence negotiating opposites to view
their own position as less powerful or
opponent’s position as more powerful than is
the case e.g. silence, anger, time pressure,
ultimatums, flattery etc.
• Some are dubious and outright immoral
Contd…
Preconditions/demands – no concessionignore/counter offer
Other party first: information
Large demand on first offer. setting the
bargaining range. Response: ignore or counter
with extreme demand.
Anchoring: fixing focus of discussion around a
point e.g. a range/ an issue.
Contd…
Deadlock and walk out: Prospect theory
Escalation: raising demands before during a
negotiation.
-Find out the limits of the other party.
- Counter: refuse to heed.
Noble/late hit
Linkage: issues that do not concern directly but
linked.
Salami: series of small negotiations.
Contd..
• Boulevarism: take it or leave it
• Split the difference: no party is
close to its aims
• Final offer - statement
• Misleading concession:
• Red herring: false, yet highly
distracting issue
• Threats, anger and aggression
• Blaming/fault finding: induced
guilt feelings
• Sudden change of mood
• Intransigence & entrenchment
• Irrevocable commitment
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Playing to fears / assumptions
Friendliness
False demand/concessions
Mutt and Jeff, good and bad
guy, good guy
Negotiator without authority
Status, authority, association
and credentiality
Principle
Time, timing and endgame
Deadlines
Draftsman/single negotiating
text
General theory
Rigid commitments to a position at/near an
opponent’s minimum settlement e.g.
Reservation Price.
1st offers have powerful effect on outcomes.
Aspirations: ideal target settlement sum - high
Time costs and deadlines. Affect both sides
and can make/ break negotiations
First offer
Determinants
•Power
•Stereotype
activation
•Past experience
•Information
Factors affecting the
extremity
•Target price
•Power
•Stereotypes
•Market information
•Framing
Effects on final outcomes
i) Extreme first offers + moderate
concessions = most successful
ii) –ve effect on evaluation.
• Attributed to an opponent’s
dispositional competitiveness/greed
•Primacy effect: tendency of people
to remember information and to
be influenced in attributions and
evaluations as presented to them
first.
•Having 1st offer accepted
immediately increases
dissatisfaction.
Aspirations
• The higher the aspirations, the more favorable
the outcomes.
• Reference point theory of aspirations:
• Act as anchors: basis for making adjustments.
• Aspiration as frames: the prospect theory
predicts that a high aspiration will increase the
likelihood that a particular settlement
proposal will be unsatisfactory.
Benefits of high aspiration
• High - Skew the range of mutually agreeable
outcomes to the benefit of the competitive
negotiator
• Fairness
• More patience
• More likely to reject offers superior to their
reservation price therefore make more
concessions.
• As reference,could lead to an impasse and less
satisfaction.
Time costs and deadlines
• Example: Herb Cohen in Japan, flight date.
• Deadlines provide a useful context to study psychology
of strategic prediction and situational constraints.
• Incentives to work and have a detrimental effect on
cooperation.
• Time pressure arises from:
i) Costs paid for time passage e.g. the opportunity cost
of the negotiator’s time; costs of bargaining agents
like attorneys.
ii) Time discounting: value of goal/prize declines with
time. It affects only the value of the surplus e.g.
shipping berries
Deadlines:
• Ends negotiations for both sides
• Forfeiting of the negotiation surplus
• Leaves both sides with their alternatives
Revealing time pressure:
• The shorter the time, the smaller the value of
bargaining surplus. Why? less demands, lower
aspirations and parties rapidly concede
• Revealing deadlines need not be a secret (self
destructive secrecy).
Don’t expose bad alternatives e.g. “I need to sell
the car today coz am leaving (the car will be dumped
anyway)”
Behavioral forecasting
 Wrong prediction based on present.
 Erroneous expectations of opponents leads to genuinely
inferior outcomes and claim more value.
*Expecting a competitive opponent, negotiators disarm
themselves with less competitiveness.
 Lessons: be informed, be prepared and ready to counter
ploys and tactics, combine economics, science and
people/relations skills.
Discussion questions
• In what ways can a negotiator handle
unexpected proposals and revelations during
negotiation? E.g. opponent revealing one’s near
bankruptcy status during a negotiation?
How can ‘weak’ parties enhance their
bargaining power? E.g. the WTO?
• What, according to you, warrants a walk out
from a negotiation?
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