Negotiation and Persuasion

Negotiation & Persuasion
Charlie Harrison
312 - 560 - 7148
1

Negotiation Paradigms
Goal
(
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Goal
Reservation Price
(
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Goal
Reservation Price
BATNA
(Best Alternative to a Negotiated Agreement)
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Goal
Reservation Price
BATNA
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Offer
Goal
Reservation Price
BATNA
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Win - Win
Exploring Relative Priorities to Expand the Pie
Delivery ASAP or Delayed
Price or Quality
Guaranteed Max or Time and Materials
One time payment or installment payment
Risk of Loss Allocation
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Win - Win
Exploring Relative Priorities to Expand the Pie
Delivery ASAP or Delayed
Price or Quality
Guaranteed Max or Time and Materials
One time payment or installment payment
Risk of Loss Allocation
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Win - Win
Requires
Trust and Information Sharing
to Work
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Zone of Possible Agreement
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Seller’s Range of Prices
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Buyer’s Range of Prices
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What determines where you settle?
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Leverage & Aspiration
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Leverage & AspirationAspiration
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Preparation
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Preparation
Know the Facts - Know the Law
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Preparation
Determine your Goal - Determine your Offer
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Preparation
Know your BATNA - Set your Reservation Price
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Preparation
Discover the other side’s BATNA
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Preparation
Discover the other side’s BATNA
Improve your BATNA
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Create Value
Build Trust
Ask Diagnostic Questions
Leverage Differences
Valuation - Future Expectations
Risk Tolerance - Time Preference
Use Post Settlement Agreements
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Create Value
Build Trust
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Create Value
Build Trust
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Questions?
)
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Prospect Theory
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General Informed that 600 Men Will Die in an
Ambush unless One of Two Routes is taken
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I
Route A
200 will be saved
Route B
1/3 chance 600 will be saved &
2/3 chance none will be saved
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Patient with Lung Cancer Given
Two Treatment Options
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Patient with Lung
Cancer Given
I
Surgery
Of 100 Cases:
10 die during Surgery
32 are dead after one year
66 are dead after 5 years
Radiation
Of 100 Cases
0 die during treatment
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II
Route A
400 will die
Route B
1/3 chance none will die &
2/3 chance 600 will die
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II
Surgery
Of 100 Cases:
90 survive the Surgery
68 survive after one year
34 survive after 5 years
Radiation
Of 100 Cases
100 survive the treatment
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I
Route A
200 will be saved
Route B
1/3 chance 600 will be saved &
2/3 chance none will be saved
II
Route A
400 will die
Route B
1/3 chance none will die &
2/3 chance 600 will die
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I
Surgery
Of 100 Cases:
10 die during Surgery
Radiation
Of 100 Cases
0 die during treatment
II
Of 100 Cases:
90 survive the Surgery
Of 100 Cases
100 survive the treatment
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Prospect Theory
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The studies have shown that
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Prospect Theory
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the emotional pain of a dollar of loss is
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Prospect Theory
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twice the emotional pleasure of a dollar of gain.
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Or
Losses are twice as powerful as gains.
Prospect Theory
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Prospect Theory
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We are risk adverse when protecting a gain.
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Prospect Theory
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We are risk seeking when avoiding a loss.
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Prospect Theory
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We are risk seeking when avoiding a loss.
The difference is how the decision is framed.
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$Starting Dollars $ $Just Gained Dollars $
Protecting A Gain (Risk Averse)
Point of Reference.
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$Starting Dollars $
Avoiding a Loss (Risk Seeking)
Point of Reference.
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$Starting Dollars $ $Just Gained Dollars $
Protecting A Gain (Risk Adverse)
$Starting Dollars $
Avoiding a Loss (Risk Seeking)
The only difference is the
point of reference.
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Questions?
)
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Anchoring & Adjustment
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Individuals in Two Similar Groups Were
Asked Two Different Sets of Questions:
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Is the height of the tallest
redwood more or less
than 180 feet?
than 1,200 feet?
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What is your best guess
about the height of the
tallest redwood?
than 180 feet?
than 1,200 feet?
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than 180 feet?
than 1,200 feet?
tallest redwood?
Average Answers: 282 feet
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than 180 feet?
than 1,200 feet?
tallest redwood?
844 feet
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than 180 feet?
than 1,200 feet?
tallest redwood?
844 feet
Difference between
the average answers: 562 feet
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than 180 feet?
than 1,200 feet?
tallest redwood?
844 feet
Difference between
Difference between
the anchors: 1,020 feet
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than 180 feet?
than 1,200 feet?
tallest redwood?
844 feet
Difference between
Difference between
the anchors: 1,020 feet
Anchoring Effect: 562 / 1,020 = 55%
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Individual Brokers in Two Similar Groups
Were Each Shown the Same House but
Given Two Different Listing Prices and
Asked Their Opinion of Value:
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Anchoring
Effect: 41%
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Anchoring
Effect: 41%
Two Groups of Business Students Were
Were Each Shown the Same House and
Given the Same Two Different Listing
Prices and Asked Their Opinion of Value:
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Anchoring
Effect: 41%
Two Groups of Business Students Were
Were Each Shown the Same House and
Given the Same Two Different Listing
Prices and Asked Their Opinion of Value:
Anchoring
Effect: 48%
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Each Member of Two Groups Was asked:
What is the Proportion of
African Nations in the UN?
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A Wheel of Fortune Generated a
Different Random Number for each of
the Two Groups.
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the Two Groups.
The Wheel of Fortune was rigged to
stop at 10 for one group and
65 for the other.
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the Two Groups.
The Wheel of Fortune was rigged to
stop at 10 for one group and
65 for the other.
Anchoring
Effect: 41%
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A Group of German Judges, Averaging 15
Years Experience, Were Each Shown the
Same Description of a Shoplifter.
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Each Judge Rolled a Ten Sided Die,
Then Gave a Sentence.
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The dice Were Loaded to Only
Show a 3 or 9.
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Anchoring
Effect: 50%
The dice Were Loaded to Only
Show a 3 or 9.
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The introduction of a random number will
create a cognitive “anchor.”
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The anchor will affect a decision
unrelated to the number.
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The anchor will affect a decision
unrelated to the number.
Knowing the anchor is random
does not change the anchoring.
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Questions?
)
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Availability
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Do more people die each year of:
Car Accident?
Cancer of the
Digestive System?
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Car Accident?
Cancer of the
Digestive System?
Annual Deaths: 35,000 147,000
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Car Accident?
Cancer of the
Digestive System?
Annual Deaths: 35,000 147,000
Number of
News Stories: 137 1
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Availability
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Items which are Vivid or more Recent
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Availability
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will have a Disproportionate impact on
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Availability
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will have a Disproportionate impact on
Risk Perception and Decision Making.
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Questions?
)
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Negotiation and Persuasion

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