Fundamentals of International
Negotiation
Dr. Marwa Daoudy
Graduate Institute
06 July, 2009
MAIN TOPICS
{ Negotiation
theories
{ Core Elements
{ Nature of Negotiation Process
{ Nature and Style of Mediation
{ Inter-Cultural Factors
{ Case-Studies: Theory and
Practice
COURSE OBJECTIVES
{
Identify key-concepts
{ Analyze situations of conflict
{ Define negotiations
{ Learn how to analyze negotiation
processes (identify needs, objectives,
sequences, number of actors)
{ Identify power relations, risks,
interests and their influence on
strategies
{ Get acquainted with psychological
dimensions
{ Understand cultural issues
OUTLINE
{
Day 1:
{ History
{ Definition
{ Cooperation
vs. conflict? Integrative vs.
distributive negotiation?
{ Underlying concepts: needs, interests,
positions, culture
{ Case-studies + exercise
{
Day 2:
{ Conflict
management, strategy, coalitionbuilding and power analysis
{ Case-studies + exercise
ORIGINS
HISTORY AND GEOGRAPHY
{ Sun
Tsu, 4th. AD
{«
Being unconquerable
lies within yourself »
{ Ibn
Khaldoun, 14th c. AD
{ Musashi,
17th c. AD
Musashi and the Rule of Samurai
{ Book
of Five Rings: the art of
war-making, competing
z
The art of negotiation, peace
and diplomacy
{ Modern
management
techniques
{ The Way for Strategy
Principles
{ The
Way for Tactics/Victory:
{Apply
lessons
{Pay attention to all details
{Know how to make a
distinction between
advantages and
disadvantages
Following the Path
{ On
the longest road,
the best way to proceed
is step by step
DEFINITION
Defining Negotiation
{ Your
{A
definition
negotiation is …………
DEFINITION
{«
A decision-making system
through which actors agree
mutually instead of acting
unilaterally”
{
Christophe Dupont, 1994
DEFINITION & NATURE
{
It is as much a psychological game as a
rational decision-making process.
{ Lewicki & Litterer, 1985
{
The negotiator is confronted to a dilemma,
“creating value” (cooperating) or “claiming
value “ (conflicting).
{ Lax & Sebenius, 1986
NEGOTIATION
{
A process during which the actors’
objective is to put an end to a conflict of
interests or an open conflict, by
attempting to reach an agreement that
would be acceptable to all
{
No resolution of problem, nor persuasion,
or pure situation of conflict but the three
at the same time (Touzard, 1977, p.
401).
THE NEGOTIATION DANCE
REACH
AGREEMENT
Conflict of interests
Analyze needs
Examine/evaluate
Select objectives
Negotiate
Select strategies
Select tactics
Anticipate
decisions taken
by other party
OBJECTIVES
ANALYZE
{ Identify
issues
{ Analyze needs (own and
other’s)
{ Identify distribution of power,
quality of relationship, time
factor and choice of strategies
{ Examine quality of negotiation
CONCEPTUALIZE/PREPARE
{
{
{
Determine parties, goals and
interests (get prepared)
Determine your upper and lower
limits (reservation point or “bottom
line”)
Determine the other party’s upper
and lower limits
Fundamentals
of Effective Negotiation
Evaluate Zone
of Agreement
Master
skills &
techniques
Understand
context of the
negotiations
A
State
of
Mind
Develop
human
relations
Know
negotiating
substance
Pin Project
{
Processes of International
Negotiations (PIN)
Kremenyuk, ed., 1990, 2002
Core Elements
{
{
{
{
{
Actors
Structure
Process
Strategy
Outcome
ACTORS
Number of Actors
{
{
Two
Three and more:
{«
N-person games» (« many
person games », Raiffa, 1982)
{Coalitions
{Difficulty of identifying actors
(sub-groups)
{Monolithic actors?
{Iterated games?
PROCESS
PROCESS:
NEGOTIATION PHASES
{ Planning:
pre-negotiation
{ Face-to-face
NEGOTIATION PHASES
PHASE I
PHASE II
PHASE III
PHASE IV
*Climate
*Make claims
*Mutual needs
* Agree
*Group Relations
* Test claims
* Problem-Solving
* Withdraw
STRATEGIES
TIME
STRUCTURE
STRUCTURE
{
{
{
Context: constraining factors
Distribution of power: symmetry,
asymmetry
Cultural/historical environment
z
z
“Background variables”
History of conflict, mutual perceptions..
OUTCOME
«
The outcomes (...) need to be addressed in
process terms, for without the process, the
outcomes cannot be explained and lessons
for better outcomes cannot be formulated"
(Zartman, 2002, p 6)
IDENTIFY THE ZOPA
{ ZOPA:
Zone of Possible
Agreement
{Zartman,
2002, p. 237
{Perception of ZOPA and possible
agreements
4000
5,500
A ZOPA (4000- 5,500) B
Price
ZONE OF POSSIBLE
AGREEMENT (ZOPA)
Outcome
{ Outcome:
agreement?
{ Objective:
reach best
agreement possible
{
Pareto-optimal agreement
Uutility party B
Pareto Efficiency
Pareto Frontier
Utility party A
COOPERATION VS. CONFLICT
PROCESS:
COOPERATION OR CONFLICT?
{ Distributive
bargaining
{ Both?
vs. Integrative
PROCESS:
INTEGRATIVE BARGAINING (I)
{ “Creating
1986)
{ Win-win
value” (Lax & Sebenius,
approach, positive sum
game
{ Problem-solving
COOPERATING (II)
{ Mutual
process
{ Strategy in common
{ Alternative solutions
{ Hierarchy of preferences
{ Reach mutually satisfying
agreement
PROCESS:
DISTRIBUTIVE BARGAINING (I)
{«
Claim value” (Lax & Sebenius,
1986)– « win-lose », zero-sum
game
{ One
party wins at the expense of
the other
COMPETING (II)
{ Targets
(results)
{ Resistance points (minimal
results)
{ Influence the other actor (s) by
applying distributive tactics
{ Impact on resistance points,
perceptions, options.
TWO FORMS OF NEGOTIATION /
STRATEGY
{
{
{
Different attitudes and strategies
Distributive: Parties compete for a fixed
amount of value
Integrative: Parties make trades in order
to arrive at a mutually-beneficial solution
Successful Distributive Bargaining
{
Distort and manipulate information,
resort to bluff and threats
{
Lack of transparency and confidence
{
Costs of reputation
Distributive bargaining
(often win – lose)
Tactics & Strategies:
z
z
z
z
z
z
z
Threats & Bluffs
Limited communication
High Initial Offers/Positions &
Low Concession Rates
Bargaining Chips
Quest Maximum Gain
Issue manipulation
Concern for Own Outcomes
Exclusively
Successful Integrative
Negotiation
{ Open
communication: no
bluff or threats
Integrative bargaining
(often win – win)
Tactics & Strategies:
z
z
z
z
z
z
Collaborative Speech
Open Communication
Accurate Initial Offers
Bridging/Log-rolling
Concern for Joint Gain
Concern for Relations
UNDERLYING CONCEPTS
CONCEPTS
{
{
{
{
{
{
{
{
Actors
Structure
Process
Outcome
z BATNA
Needs
Interests; conflict (interests) & conflict management
Positions
Power
BATNA
Identify your Best Alternative to a
Negotiated Agreement (BATNA)
Why BATNA as a measure?
“…We need to define a reference point or
baseline from which the benefits […] can be
measured. In this context, the appropriate
baseline equals the net benefit that would have
flowed from a continuation of the present
arrangement […]”
“An integrative solution can be defined as one
increasing the benefits to all parties beyond […]
the BATNA…”
Underdal, 2002
THE IMPORTANCE OF BATNA
{
{
Determine your BATNA – Best
Alternative to a Negotiated
Agreement
Determine their BATNA
NEEDS
IDENTIFYING
NEEDS
{ Negotiate
{ Which
to satisfy needs
needs?
{ Maslow’s
hierarchy of needs
Hierarchy of Needs
Personal achievement
Recognition (status, …)
Social (love, affiliation…)
Security (danger, fear..)
Basic (survive, water, food, air…)
INTERESTS
THE NEGOTIATOR
{
The objective of the negotiator is
to satisfy his/her interests
{ Negotiations
issues, conflict and
underlying interests:
interdependence
INTERESTS
{
{
Identify real interests at the
heart of negotiations
Interests: actors’ real or
underlying objectives
INTERESTS
« The weight, value and
consequence of an event”
(Dupont, 1994, p. 35)
{ Objective and subjective
dimensions (Zartman & Rubin,
2000)
{ Perception by one actor that his
objectives are being blocked by
another actor, intentionally or
not
{ Conflict of interests
{
POSITIONS
POSITIONS
{ Implicit
or explicit
{ Focal
points or actor’s claimed
objectives
{ All
strategies are derived from
them
PRESCRIPTIVE APPROACH
{
{
{
{
{
Observe own behavior and others’:
“red lines”
Show flexible and cooperative spirit
Try and find innovative solutions
and alternatives
Develop options for mutual gains
Accept agreement if objective and
viable
PRESCRIPTIVE
{ Focus
on real interests rather
than positions
« Be firm on issues/interests not
positions »
{ Interest-based
negotiations
DOUBLE PROCESS
{
Interest-based negotiations:
mutual interests
{
Bargaining: positions
{
Turning points: ripeness
WHY IS COOPERATION DIFFICULT
TO ACHIEVE?
Strategic Interaction
{
{
{
{
{
Liberal Institutionalists and Game
Theory
Assess factors that inhibit
collaboration in an anarchic setting
Focus on the interaction between
two actors, each with only two
possible strategies , one
cooperative, one competitive
Four possible outcomes
Strategies chosen on rational
calculation
Positive-Sum Game
{ (Prisoner’s
Dilemma)
Prisoner R
Prisoner C
silent
confess
-1,-1
-10,0
confess 0,-10
-5, -5
silent
India & Pakistan’s Arms Race
{ (Prisoner’s
Dilemma)
India
Pakistan
Coop.
Defect
Coop.
3,3
1,4
Defect
4,1
2,2
Prisoner’s Dilemma
{
{
{
Explains wide range of irrational outcomes
in the international arena in rational terms
States choose sub-optimal outcome
Importance to identify mechanism that will
convince all actors that there is no danger
of defection
CULTURE
Culture and Negotiation
{
{
International negotiations: more
complex than domestic
negotiations
Differences in national cultures
and differences in political, legal,
and economic systems often
separate potential
negotiation/business partners
CULTURAL DIFFERENCES
{
{
Communication styles—direct
or indirect
Sensitivity to time—low or
high
NEGOTIATION & CULTURE
{
Hofstede, G., Culture’s Consequences,
1980, 1991.
{
Cultural dimensions can influence the
actors’ decision-making process
{ Individualist / Collectivist
{ Distant towards power
{ Masculine / Feminine
{ Risk-prone / risk-averse
Top 10
Cultural Differences in
Communication Styles
100
80
60
40
20
0
n
pa
Ja
ce
an
Fr
na
hi
% Formal
C
K
U
il
az
Br
a
di
In ny
a
m
er
G
SA
U tian
en
rg
A
n
ai
Sp
o
ic
ex
M a
i
er
ig
N
% Direct
Preferences for ProblemSolving Negotiation
100
80
60
40
20
0
n
ai
Sp
il
az
Br
ia
er
ig y
N
an
m
er
G
o
ic
ex
M
K
U
SA
U
a
di
In
ce
an
Fr tina
en
rg
A
na
hi
C
n
pa
Ja
% Win-Win
Preferences for Broad Agreements
50
40
30
20
10
0
K
U
n
ai
Sp
o
ic
ex
M a
i
er
ig
N
SA
U
il
az
Br tina
en
rg
A
na
hi
C
ce
an
Fr
a
di
In ny
a
m
er
G
n
pa
Ja
% Preference for Broad Agreements
NONVERBAL
COMMUNICATION –
COMMUNICATING WITHOUT
WORDS
KINESICS
{ Communicating
through body
movements
{ Facial expressions
{ Body posture
PROXEMICS
{
{
{
The use space to communicate
The personal bubble of space
“North Americans prefer more distance
than Latin and Arab cultures” (?)
TOUCH
{
{
{
Basic human interaction
Greeting, shaking hands,
embracing, or kissing
“Latin European and Latin
American cultures-more touching
than Germanic, Anglo, or
Scandinavian cultures” (?)
CONCLUSIONS
{ Successful
negotiators:
Understand negotiation steps
z Build cross-cultural communication
skills
z Understand non-verbal communication
z
Negotiation Elements
{
{
{
{
{
Actors
Structure
Process
Strategy
Outcomes
{
CASE- STUDIES
CASE-STUDIES
{
Oil pricing exercise
{
Kyoto Protocol (1997)
{
Peace Negotiations: Syria & Israel
(1991-2000)
{
CASE- STUDY : OIL PRICING
BATIA
$30
$30
Alba
$ 110
$20
Alba
$ 20
Batia
$ 110
$20
ALBA
Alba
$ 180
Alba
$ 10
Batia
$ 180
Alba
$ 80
Batia
$ 20
$10
$10
Alba
$ 210
Alba
$ 30
Batia
$ 80
Alba
$ 150
Batia
$ 10
Batia
$ 210
Batia
$ 150
Alba
$ 50
Batia
$ 30
Batia
$ 50
Groups - Allocation
{
Alba: Ms. Gaskell, Ms. Pujol,
Mr. Stringer, Mr. Al-Kaabi
{ Batia:Ms.
Maharavo, Mr.
Sinimale, Mr. Ziegler, Mr. Al
Maysari
{
ANALYZING RESULTS: OIL PRICING
Cooperation under Anarchy
{ Benefits
of mutual cooperation (CC) relative to
mutual defection (DD) & benefits of unilateral
defection (DC) relative to unilateral cooperation
(CD)
{ For mutual benefits to exist, actors must prefer
unilateral defection (DC) to unilateral
cooperation (CD).
{ Cooperation desirable but not automatic
Collaboration Problems
{ Equilibrium
outcomes are suboptimal:
defection is dominant strategy
{ Cooperation
{ Need
unlikely in single-play
to monitor and increase shadow of
the future
{ Arms race as iterated PD
Strategies to Impact on Payoff
Structures
{ Subject
to change through unilateral,
bilateral and multilateral strategies
{ Possible
bilateral strategy: issuelinkage (combine dissimilar games)
Reciprocity as Solution to Anarchy
{ Expectation
of continued interaction:
“iterated environment” (Oye, 1986)
{ Lengthening
shadow of future:
{Decompose
interactions over time
(Schelling, 1963; Axelrod, 1984)
{Issue-Linkage: cooperation on one
issue contingent on cooperation in a
separate future issue
Tit-for-Tat
{ Conditional
Cooperation: “Tit-forTat” (Axelrod, 1984)
{ Strict
reciprocity after initial
cooperative move in repeated PD
game
Solving Games
{
Nash equilibrium
z
z
{
“I’m doing the best I can given what
you are doing”
“You’re doing the best you can given
what I am doing.”
No player should want to change
his/her strategy once they have
seen what their rivals have done
(robust to unilateral defection).
Equilibrium
{
{
{
{
In microeconomics, an equilibrium is
an optimization decision made under
constraint (given a state of the
world)—a best move.
In game theory, it is the same, except
that the constraint is what the other
players choose to do; the optimization
is a best reply to the others’ expected
moves.
The others’ moves also are best
replies.
A Nash equilibrium is a set of best
replies.