Negotiations and Conflict Resolution
Psych 253
Judgments and Decisions
Negotiations
Barbara Mellers
Texoil

An independent service station in the Port of Los
Angeles is for sale by owners (married couple)

Texoil, a large petroleum refining company, is a
potential buyer (Texoil representative)

Parties have 5 minutes to prepare and 30 minutes to
negotiate and discuss Texoil’s possible purchase of
the service station

When you prepare, think about your BATNA, your
reservation price, and your underlying INTERESTS!
Each Side’s Information
Texoil Rep.
BATNA
Reservation
Price
Interests
Station Owner
Each Side’s Information
Texoil Rep.
BATNA
Reservation
Price
Interests
$675,000
(Build one)
Station Owner
$400,000
(BP offer)
Each Side’s Information
Texoil Rep.
BATNA
$675,000
(Build one)
Reservation
Price
$500,000
Why not $675K?
Minimart = $100K
Upgrades = $??
Interests
Station Owner
$400,000
(BP offer)
$553,000 ($488,000 after taxes)
Boat loan: $230,000
Boat ready: $68,000
Food, health, clothing: $75,000
Boat repairs: $40,000
Savings after return: $75,000
Each Side’s Information
Texoil Rep.
BATNA
$675,000
(Build one)
Reservation
Price
$500,000
Why not $675K?
Minimart = $100K
Upgrades = $??
Interests
Good price
Good managers
Station Ownership
Station Owner
$400,000
(BP offer)
$553,000 ($488,000 after taxes)
Boat loan: $230,000
Boat ready: $68,000
Food, health, clothing: $75,000
Boat repairs: $40,000
Savings after return: $75,000
Time off (2 years)
Spouse’s health
Sail around the world
Savings / future income
Health insurance, food, etc.

Who reached an agreement?

What kind of information did you share?

What was the key to an agreement?
Initial Texoil Situation
Station Owner’s
Reservation Price
($553,000)
Texoil Rep’s
Reservation Price
($500,000)
400
450
BATNA
For Station Owner
(or, stay put)
500
550
Sale Price
(in thousands)
600
650
700
700
BATNA
For Texoil Rep
Revised Texoil Situation:
If Texoil Representative includes Job Offer Upon Return
Station Owner’s
Reservation Price
($467,000)
Texoil Rep’s
Reservation Price
($500,000)
460
470
480
490
500
510
Sale Price (in thousands)
520
530
Characteristics of
Integrative Bargaining





Multiple issues
Differing preferences, expectations, risk attitudes
Differing interests
Future relationship
Multiple alternatives
Distributive
Bargaining
Integrative
Bargaining
One issue
Win-Lose
Many issues
Win-Win
Outcome
Process and outcome
Max share of pie
Max size and share of pie
One time
Repeated times
One position
Many options
Keep interests hidden
Share interests
Keep information hidden
Share information
Competitive
Cooperative/Competitive
Position-based
Interest-based
TACTICS
Distributive
Bargaining
Integrative
Bargaining
Define your BATNA
Analyze own & other’s interests
Define your reservation price
Analyze own & other’s priorities
Define your target level
Prepare multi-issue proposals
Prepare objective rationales
Think creatively about shared
interests
Open high
Cooperate
Anchor with first offer
Build trust
Discuss single issue
Make package deals
Make bi-lateral, not
unilateral concessions
Make multiple offers
simultaneously
Persuade through objective
rationale
Ask for and share info about
interests & priorities
Why did impasses occur?
Negotiators may have:
Escalated commitment to positions
Tried to win over all else
Believed that the pie was fixed (other party’s interests
are opposite yours)
Had positive illusions and unrealistic aspirations
Had negative views of opponent
Integrative Negotiation

Separate people from problem




Should you be a hard or soft negotiator?
Focus on interests, not positions
Generate multiple possibilities
Base results on objective standards
Advantages of Integrative Agreements

Improve outcomes

Create more stable agreements

Improve implementation

Strengthen the relationship
But..

The non-separability of integrative and distributive
negotiations


Tactics that claim value can impede its creation


“Value that has been created must be claimed”
Persuading, withholding information
Approaches to creating value are vulnerable to
claiming tactics

Disclosing interests, priorities
The Prisoner’s Dilemma
Your Partner
Not confess
Confess
2 yrs
0 yrs
Not
confess
2 yrs
You
10 yrs
10 yrs
5 yrs
Confess
0 yrs
5 yrs
The Negotiator's
Dilemma
Your Counterpart
Create
Claim
Good
Great
Create
Good
You
Terrible
Terrible
Mediocre
Claim
Great
Mediocre
Resolving the Dilemma

Prepare for integrative and distributive
opportunities



Analyze own & other’s interests; avoid fixed-pie perception
Know your BATNA, Res Price, objective arguments
Balance cooperation and competition


Build trust: don’t jump in trusting immediately, but be open to a trusting
interaction
Ask for and share info about interests & priorities, but watch out for unilateral
information exchange