Lesson 1, Topic 1
In Progress

3.1. The concepts of “favoured outcome’, “settlement point” and “point beyond which you cannot go” are explained for a selected scenario.

ryanrori January 7, 2021

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Some Terms (for reference)

a.  Bargaining mix:  the set of issues that are or could be considered in the negotiations.  Often, there will be substantial differences between the parties in the importance of various issues.  Having multiple items in the bargaining mix and being creative in dealing with them can be very helpful – in both competitive and collaborative negotiations.

b.  BATNA (best alternative to a negotiated settlement):  the best alternative a negotiator has other than completing the present negotiation with the other side

– Sometimes there are only two choices:  reach a deal with the other party or no settlement at all

– Other times, there may be multiple alternatives that exist or can be developed

– (Good) alternatives are important because they give a negotiator the power to walk away from a competitive negotiation when the deal is not very good

– Good competitive negotiators identify their realistic alternatives before beginning negotiations, so they can judge how firm to be in the negotiations

c.  Target point (aka aspiration):  the point at which a negotiator would like to conclude negotiations, his/her optimal goal.  Each item in the bargaining mix will have its own target, resistance, and starting point.

d.  Resistance point (aka bottom line):  the point furthest from the target point a negotiator will go, but the point can change.  In a sales negotiation, this would be the most a buyer will pay, and the least the seller will accept

e.  Starting point:  the first position a negotiator plans to take.  In a sales negotiation, this is the asking price stated by the seller, and is the first counter-offer made by the buyer

f.   Bargaining range (aka zone of potential agreement):

– In a sales negotiation, there is a positive bargaining range if the buyer’s resistance point is above the seller’s (the buyer is maximally willing to pay more than the seller is minimally willing to sell for)

– If the reverse is true (the buyer won’t maximally pay more than the seller will minimally accept), there is a negative bargaining range – and a likely stalemate

– In a competitive negotiation with a negative bargaining range, there will be no solution unless one or both parties change their resistance points (or other items can be introduced into the bargaining mix)

– In a competitive negotiation, it is hard to learn about resistance points and whether a positive settlement range exists

– In a collaborative negotiation, the parties may talk openly about these matters

g.  Settlement point:  the final point(s) of agreement, if this happens

The disadvantages to each party for each position are considered prior to meeting. 

What will be your opening offer? If it is too high, you might insult the other person or frighten then off. If it is too low, you may lose out. To do this, you may need to consider the agreement zones that might occur.

Your opening offer will be based on a combination of the range of ‘reasonable value’ of the things that you want, the situation of the other person and the dynamics that you want to cause within the negotiation itself.

In practice, if the other person makes an opening offer first, which can be a useful action, you may revise your opening offer. Nevertheless, it is still worth deciding where you will start.