BUS403: Negotiations and Conflict Management (2016.A.01)

2a. Explain the distinction between positional bargaining and interest-based bargaining

• Define positional bargaining and interest-based bargaining.
• Explain the distinction between positions and interests in negotiation.

Positional bargaining focuses on what the negotiators want. In this type of negotiation, parties hold onto a fixed idea or position and are not concerned with underlying interests. The parties focus on the outcome – divide a fixed pie to claim value – and discussions frequently become adversarial.

Interest-based bargaining focuses on why the needs, concerns, and desires of the negotiators are important. Since the parties are concerned about underlying issues, they look for ways to collaborate and expand the pie to create value. Negotiators focus on achieving mutually-agreeable terms and preserving their personal or business relationships. We also call interest-based bargaining: problem-solving, integrative negotiation, win-win.

For example, is it more important for a manufacturer to simply state his terms of a transaction to a valued but reluctant supplier (position) and possibly lose future transactions, or would it be better to attempt to find creative ways to satisfy the needs of both parties (interests) to preserve a good working relationship?

2b. Identify the framework of five negotiation strategies and their strengths and weaknesses in resolving conflict

• What is an example of a competitive negotiation strategy?
• What is an example of a cooperative negotiation strategy?

As we explored in Unit 1, when comparing the strengths and weaknesses of different negotiation approaches, we should examine the importance of the relationship and outcome to the parties. For example, business owners often need to decide whether it is better to lose the trust of an important customer (relationship) to obtain a short-term gain (outcome).

Review this figure to consider the business owner's best strategy.

Conflict-Handling Styles

2c. Identify types of biases that influence our emotions and attitudes and affect our decision-making

• Define and explain how the four main cognitive biases – confirmation bias, anchoring bias, halo effect, and overconfidence bias – influence our decision making.
• How would knowledge of the endowment effect help a real estate broker negotiate a selling price for a house?

Because decision making is a cognitive activity, various beliefs and preconceptions influence our objectivity. We may derive inferior or suboptimal conclusions based on distorted ideas, misjudgments, and past experiences that do not apply to the current situation, rather than rational thinking. Four common cognitive biases include confirmation bias, anchoring bias, halo effect, and overconfidence bias.

For example, homeowners tend to overvalue the houses they plan to sell because they are emotionally attached to their property. A real estate broker can present objective market data to convince the seller their price is unrealistically high. Potential buyers do not have the same unique appreciation for the house. The endowment effect may prevent buyers and sellers from negotiating a mutually-agreeable price.

2d. Explain the importance of controlling our emotions to succeed in negotiating

• Explain how emotions can help or hinder successful negotiations.
• What are some advantages of critical thinking?

Recognizing Stereotypes and Bias discusses why critical thinking is important to reach informed and objective conclusions. The author reminds us that emotions can help or hinder our ability to think critically: "emotions that allow you to deny reality generally produce undesirable results; emotions that encourage you to explore alternatives based on principles of fairness and justice can produce very desirable results".

The author explains that "previous situations, personal histories, general assumptions about an issue – may need to be examined themselves" to avoid making incorrect decisions.

 

Unit 2 Vocabulary

This vocabulary list includes some terms that may help you answer some of the review items above and some terms you should be familiar with to be successful in completing the final exam for this course.

• Anchoring bias
• Cognitive bias
• Emotional bias
• Halo effect
• Interest-based bargaining
• Motivational bias
• Negotiation phases
• Overconfidence bias
• Positional bargaining
• Social perception biases
• Stakeholders
• Stereotype
• The endowment effect