This document discusses key concepts and principles for effective negotiation. It defines negotiation as a process where interdependent parties come to agreement on allocating scarce resources. Common negotiation problems include leaving money on the table through lose-lose outcomes, settling for too little due to overestimating one's bargaining power, and prematurely walking away from negotiations. The document outlines strategies for improving negotiation skills, including understanding one's best alternative to a negotiated agreement and reservation price without revealing them, strengthening one's bargaining position, and using objective criteria when making concessions.

1. NEGOTIATION SKILLS

2. Negotiation: A process by which two or
more people come to agreement on how to
allocate scarce resources.
 Parties are interdependent; neither has complete
power to choose
 The process is a decision, not a contest of wills

3. COMMON PROBLEMS IN
NEGOTIATION
Leaving money on the table (lose-lose
negotiation)
Settling for too little (winner’s curse)
Walking away from the table
Settling for terms that are worse than
your current situation (agreement bias)

4. WHY ARE PEOPLE INEFFECTIVE
NEGOTIATORS?
Absence of relevant and diagnostic
feedback
 Search for confirming information
 Egocentrism
Satisficing
 Versus Optimizing
Self-reinforcement
 Fear of change and experimentation

5. MYTHS
Good negotiators are born, not made
Experience is a great teacher
Good negotiators are risk-takers
Good negotiators rely on intuition

6. KEY NEGOTIATION PRINCIPLES
 Best Alternative To a Negotiated
Agreement (BATNA)
 Reservation price
 Bargaining zone
 Aspiration level

7. KEY NEGOTIATION PRINCIPLES
 Best Alternative To a Negotiated
Agreement (BATNA)
 Reservation price
 Bargaining zone
 Aspiration level

8. BATNA TIPS
 Know your BATNA
 Do not think of your BATNA in aggregate
terms
 Improve your BATNA before you
negotiate
 “Fall in love with three” rule
 You want your counterpart to think
you have a good BATNA

9. KEY NEGOTIATION PRINCIPLES
 Best Alternative To a Negotiated
Agreement (BATNA)
 Reservation price
 Bargaining zone
 Aspiration level

10. RESERVATION PRICE
 Reservation Price is your bottom line
 The point at which you are indifferent to whether you
achieve a negotiated agreement or walk away. Beyond
the reservation price, you prefer no agreement.
 Reservation Price is equal to your BATNA +/- other issues
that make you want to do the deal
 e.g., opportunity costs, switching costs, ego, miscellaneous
preferences
 Define your reservation price before negotiating
 Learn your opponents’ reservation price, if possible

11. SHOULD YOU REVEAL YOUR BATNA AND
RESERVATION PRICE?
 Do not reveal your reservation price!!!
 One of the critical pieces of information in a
negotiation is the other party’s reservation point. If it
becomes known to one party, the negotiator can
push for a resolution that is only marginally
acceptable to the other party.
 Do not state ranges
 Reveal your BATNA only when:
 You are nearing an impasse
 You have a strong BATNA
 You want to make an agreement in the current negotiation

12. KEY NEGOTIATION PRINCIPLES
 Best Alternative To a Negotiated
Agreement (BATNA)
 Reservation price
 Bargaining zone
 Aspiration level

13. KEY NEGOTIATION
PRINCIPLES
 Best Alternative To a Negotiated
Agreement (BATNA)
 Reservation price
 Bargaining zone
 Aspiration level

14. DISTRIBUTIVE BARGAINING
TACTICS
 First offers
 Concessions
 Persuasion

15. FIRST OFFERS
Who made the first offer?
How did the first offer affect the
negotiation?

16. THE FIRST OFFER
 How high should the first offer be?
 “As high as you can go without embarrassing
yourself in front of a respected 3rd
party” (Fisher &
Ury, 1991)
 What’s embarrassing? What’s optimistic? Learn
the market!
 Only let the other party make the first offer when
 You have no information
 It is inappropriate to do so (e.g., job negotiations)
 Immediately re-anchor if your counterpart makes the first
offer

17. CONCESSIONS & PERSUASION
 Allow yourself room to make concessions
 Don’t go in with a “first and final offer”
 Make bi-lateral, not uni-lateral concessions
 Make your concessions smaller as you
approach your goal
 Use objective rationale to support your
argument
 Again, learn the market

18. NEGOTIATION STRATEGIES
 Know your BATNA
 Strengthen your BATNA whenever possible
 Know your reservation price
 Do not reveal your reservation price
 Research the other party’s BATNA/reservation price
 Define your aspiration level and focus on that
 Make first offers whenever possible
 If they make the first offer, immediately re-anchor
 Watch how you are making concessions
 Prepare objective rationale for your arguments