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Negotiation (Biases (Escalation of commitment :star: (antidotes to…

- - - - competition amongst buyers:seller has more power
      - econ preferences
        
        econ self interest
      - econ decision making
        
        perfect rationality to make optimal decisions
      - Standard economic theory: if you are risk neutral, you should go with the option with the highest expected value, risk averse will pay to avoid risks, and risk seeking decision makers will pay to make risks
    - - human preferences
        
        goes beyond self economic interests: econ, psycho, social outcomes for both themselves and others
      - Human decision making
        
        bounded rationality
    - - More outside options, more bargaining power; competition amongst potential buyers rather than seller vs buyers
  - - - Agreement bias
      - Competitive arousal bias
    - - Social preference
      - Want to look good, want to save face and to appear consistent
      - Problem of goal displacement
    - - negotiation feels like a competition
      - negotiation feels like it's going badly
      - announce initial demands publicly
      - losing time or money as it drags on
      - extreme demands are made
    - - avoid making decisions under time pressure
      - avoid making decisions in public
      - Hire someone to overrule your decision
      - evaluate managers on a portfolio of decisions, not just one
      - anticipate a bidding war so you can avoid them
      - prepare a strategic plan
  - - - if you frame the outcomes as possible gains, they will tend to be risk averse and will likely make compromises to reach a win-win
      - if you frame counterpart's outcomes as possible losses, they will tend to be more risk seeking and less likely to compromise, they will try to hard ball their way
  - - - We think our perspective is complete, reliable and accurate even when it's not
        
        People overweight the information held by and related to themselves
      - People think about what they know and don't think about what they don't know
        
        overconfident about our info
      - overweight our own info and underweight other's info
        
        deadlines affect both parties equally, but people often believe they are more affected by deadlines, hence this decreases the chance of them using deadlines as a negotiation tactic
      - Leads negotiators to believe their own proposals are more fair than their counterparts, get more breakdowns and worse outcomes
      - How to prevent this
        
        Perspective taking
        
        "If I were my counterpart, what would I be thinking and planning?"
        
        Explicitly considering counter-arguements
        
        Devil's advocate
        
        "Why might we be wrong?"
        
        Pre-mortem
        
        Imagine the plan failed, why did it fail?
    - - "we believe what we already believed"
      - People tend to search for, interpret and remember information in a way that confirms our existing beliefs
      - Focus on and overweight evidence that confirms prior beliefs and neglect evidence that disconfirms our beliefs
      - Expertise knowledge does not make opinions converge, only econs will converge on the same opinion
    - - "we believe what we want to believe"
      - People search for, interpret and remember information in a way that favours themselves
      - Attributions to success or failures
        
        If I succeed it's because of internal factors
        
        If I fail it's because of external factors
        
        fairness can be viewed differently in the same situation
      - Memory is distroted for outcomes
        
        people tend to remember good outcomes and forget bad ones
        
        bias blind spot
        
        overly optimistic beliefs
        
        self-destructive behaviour
- - - - able to place proposals on the table, you feel like you can control the negotiation
    - - can push the other side to make unilateral concessions
  - - - Egocentrism and ethnocentrism
      - Assume your perspective is right and theirs is wrong
      - neither party attempts to understand each other's cognitions
      - both sides blame each other and blame the other culture for their failure
      - Surface understanding may not equate to true understanding
      - participants feel frustrated and angry
      - neither party generally understands or works with the other party
    - - behaviours, speech, artifacts, food and dress are visible
      - values, norms and beliefs are invisible
  - - - Egalitarian or Hierarchal
        
        low power distance vs high power distance
        
        bottom up or top down discussion
    - - Direct or indirect
        
        direct (low context)
        
        explicit, blunt, verbal and direct
        
        task focused
        
        indirect (high context)
        
        major portion of communication is implicit, non-verbal and indirect
        
        context is necessary to understand communication
        
        relationship focused
    - - Individualism or Collectivism
        
        independant actors
        
        inseparable from their groups
    - - Achievement orientation or nurturing orientation
        
        equity based fairness vs need based fairness
    - - risk aversion or risk seeking
    - - Long term or short term orientation
        
        value saving resource and persistence is achieving goals
        
        value personal stability and living for the present
  - - - study the culture and negotiation setting
    - - cultural adaption increases trust and liking and decreases cultural distance
      - moderate adaption is more effective than no adaption or substantial adaption
    - - difference resources and markets, different interests
  - - - Develop personal standard as to how much you are willing to change
      - Avoid attribution errors
        
        Egocentrism
        
        blaming problems on the other side
        
        Ethnocentrism
        
        blaming problems on the other culture
    - - Exploit other's cultural weakness
      - Learn how to show respect for the other culture
      - minimise own cultural weakness
      - Identify differences that may create integrative potential and trade across those differences
      - understand what may cause misunderstanding
- - - - discover underlying expectations and beliefs
      - Make package proposals (may be multi-issue or state-contingent
      - Discover underlying interest/beliefs
      - Add new issues or options, then repeat
  - - - increase partner's trust in you
      - Reduce risk via risk sharing
      - diagnose if counterpart is honest or trustworthy (solve dilemma of trust)
      - increase incentives for parties to perform at higher level
      - Build on differences in expectation and beliefs, rather than argue on it, bet on it
      - Exploit counterpart's biases to create agreement
        
        you're betting on the fact that they are more biased than you are
  - - - The faster you cycle through bad ideas the faster you'll come up with a good one
    - - brings more ideas to the table and communicates new ideas more effectively
  - - - Egocentrism
        
        We think our perspective is complete, reliable and accurate even when it's not
        
        People overweight the information held by and related to themselves
        
        People think about what they know and don't think about what they don't know
        
        overconfident about our info
        
        overweight our own info and underweight other's info
        
        deadlines affect both parties equally, but people often believe they are more affected by deadlines, hence this decreases the chance of them using deadlines as a negotiation tactic
        
        Leads negotiators to believe their own proposals are more fair than their counterparts, get more breakdowns and worse outcomes
        
        How to prevent this
        
        Perspective taking
        
        "If I were my counterpart, what would I be thinking and planning?"
        
        Explicitly considering counter-arguements
        
        Devil's advocate
        
        "Why might we be wrong?"
        
        Pre-mortem
        
        Imagine the plan failed, why did it fail?
      - Confirmation bias
      - Self serving bias
- - - - Intense and bold, winners and losers, adept at leverage and tactics
    - - Close the gap, super rational, anchor positions, apply fair standards
    - - Nurtures rekayinships while solving problems, avoids conflict, listens and cares
    - - Digs into underlying issues, propose alternatives, creative problem solvers, not focused on closure
    - - Tactful and diplomatic, reveals selectively and uses information strategically
  - - - Distributive
        
        Different goals
      - Integrative
        
        Place different value on different issues
      - Congruent
        
        Same goals
    - - Impossible to make someone better off without making someone else worse off
    - - Just give a reason
    - - When your partner accepts your first offer it means you could’ve done better
    - - Identifying
        
        Interest vs positions
        
        Interest
        
        What they really want
        
        Position
        
        What they say they eant
      - Trading
        
        3 steps IPA
        
        Make packages
        
        Add new options
        
        Discover underlying interests
        
        Techniques :star:
        
        Bridging
        
        Creative solutions for win win
        
        Finding the money
        
        Pulling money from another bucket
        
        Non specific compensation
        
        To help strike a deal on X, give the counterparts something on unrelated issue Y
        
        Cost cutting
        
        “Is there something you’re buying that we can buy at a lower cost.”
    - - Offer multiple equivalent simultaneous offers (MESOs)
      - Two or three offers with different dimensions but are of same value to you
    - - Reopen negotiation and try to come up with a new settlement that’s better for both parties
      - Must agree that if either party doesn’t like the new agreement, you can revert back to the original agreement
- - - - Main sources comes from outside options
        
        Key outside option is to form coalition with someone else
        
        How much you can demand from one coalition depends on your power: what you can give and what outside can give you
      - 4 sources of power :star:
        
        Having stronger options
        
        Perspective
        
        Your sensitivity to monitor and adapt
        
        Preferences
        
        Strategies
    - - Equity
        
        Effort and performance are highly valued
      - Equality
        
        Friendship and harmony are important, and there’s too little information
      - Need
        
        Used when the welfare of the other is paramount
      - Status quo
        
        Assumption that previous behaviour is good proxy for future
      - People may reject options that are objectively valuable if they perceived that they’ve been treated unfairly
        
        Ultimatum bargaining game
        
        Expected value
        
        Chicken game
        
        Don’t play if you can avoid it
        
        If you have to: credible commitment
    - - High
        
        More optimistic, more likely to take action and have a broad vision of the future
        
        More prone to risk taking behaviour, insensitive to social relationships and may view lower power counterparts as tools
      - Low
        
        Less overconfident
        
        More sensitive to social relationships, more adaptive and accommodating
  - - - tactics that are valuable in simple negotiation become more risky and don't scale up well
        
        Extremely self interested first offers
        
        likely to motivate defensive coalitions
        
        Bluffs or threats of walking away
        
        unlikely to seem credible unless you have veto power
        
        Trading information
        
        Difficult because of the large number of parties involved and the issues that need to be considered
        
        Using post-settlement settlements
        
        Few or no Pareto improvements (helping all without harming any)
      - Controlling the process for collective gain is more important than ever
        
        never go one issue at a time, go for IEPA
      - Agreement bias in simple negotiations can turn into the leadership trap
        
        Don't negotiate 1 on 1 with N parties, have them negotiate 1 on N with you
        
        coordinate a network of trades and concessions among all parties
      - Deadlines can lead to Escalation of commitment
        
        Panic stupid time
        
        too much info, too little time, too many proposals, too much left undone, emotions flying all over the place
        
        Happy generous stupid time
        
        so pleased that the negotiation is almost over and that the stress is almost done with that you end up giving more away
        
        in complex negotiations, stupid time is even more stupid
        
        never accept a rushed deal that you do not understand or worse than your RP
        
        Use multiple deadlines or extend the deadline
        
        Use deadline effects against them
        
        Offer a deal that's great for you that is complex
        
        Since they may be giving things away, ask for them"
        
        "Don't worry about it, we'll take care of it"
    - - key questions
        
        Who are my allies?
        
        is the coalition strong enough to pass agreements you want, or block ones you don't want?
        
        is the coalition stable?
        
        who will stand against me?
        
        would they be strong enough to block what we want?
      - Discussion vs Voting
        
        First vote almost always fails, but voting exposes the problems
        
        Voting forces people to work harder linking issues and building multiple issue proposals
      - Similarities vs differences
        
        find similarities to bind the parities together
        
        understand the interests of each party and being creative about identifying common interests
        
        find differences to trade in order to create value
        
        though discussing differences usually make it harder to work together
    - - Universal consensus gives a more stable outcome, but is harder, more frustrating and needs more compromise
      - Majority rule gives less stable outcomes, the smaller the majority, the less stable it is; easier to achieve due to less compromise
    - - if you try to aggressive block a coalition, the others will turn on you, be sneaky
      - encourage another person who may not want the deal or encourage the coalition to exclude them
        
        Do a side deal
        
        encourage extreme positions or mistakes that will make the majority exclude them
        
        build a side alliance (given that interests are aligned)
        
        encourage majority's mistakes or extreme positions that would make some parties reject the deal
      - when to block, when to join majority
        
        being excluded has future consequences
        
        even if you want a breakdown, you shouldn't vote no unless there are enough people blocking the coalition
- - - - More information, perspectives, analytical skills, more power and options, emotional support and confidence and synergy from all the above
    - - In group favouritism
      - Out group homogeneity
      - Groupthink
      - Motivation problems
      - Coordination problems
  - - - Decide how to balance with group mates
      - Cooperation
        
        Build trust
        
        Unite with other group to solve their problems
        
        Create value
      - Competition
        
        Divide and conquer
        
        Propose different deals with different group members
        
        Claim value
    - - Step back and think of only value creation, and negotiate
    - - Prisoners dilemma
      - Lying, the ultimate betrayal
        
        Upside is that you’ll win this time
        
        Downside is that your reputation is branded forever
        
        Catch a lie
        
        Contradict info that you now to be true
        
        Contradicts previous lie
        
        Total nonsense
      - Krunching
        
        Not saying a number explicitly, asking them for a better deal, not revealing information
- - - - Satisfici g is when people settle for a suboptimal outcome
      - Overchasing perfection is when people refuse to settle for anything but a perfect outcome
- - - - Emotional
        
        fear, stress, anxiety
      - Economic
        
        salary affects you every month for the rest of your life
        
        people equate salary with self worth
      - Relational
        
        Never worth burning bridges to get a better deal
    - - Consequences of not negotiating
        
        candidate
        
        suboptimal outcome
        
        recruiter
        
        winner's curse
      - Candidates overworry that it may make them seem greedy
        
        misconception
        
        firms expect negotiation and leave room for it
        
        if you don't negotiate you come across as passive and desperate
        
        if you prepare and have good info of what you're worth, a negotiation makes you look competent
      - Candidates fear losing the offer
        
        loss aversion
        
        extemely rare
        
        it means either the company is a complete outlier or they negotiated completely inappropriately
      - Employer often has more power than the candidate
        
        Lead people to undervalue their own skill and worth
        
        misconception
        
        Most companies do not want to seem open to negotiate, but will if asked
    - - Keep trying
        
        Other details may be negotiable
        
        perhaps they need a stronger reason
      - Don't push for more than 3 times though
      - What if they ask you for your expectation before offering the job?
        
        reason
        
        to see if your expectations are within their range
        
        to see if you will undervalue yourself
        
        response
        
        try to dodge the question, push it off until you recieve the offer
        
        if they insist, give a range that overlaps your AP and their average
    - - TRY
        
        Plan your first counter-offer, do research and figure out how to present it
        
        Use your reason/justification of your value to re-anchor them to your counter offer
        
        BUILD RAPPORT
        
        Always assume the offer is negotiable
      - Prepare
        
        Explore issues
        
        Issues they care about (their BATNA RP and AP)
        
        Research
        
        industry average salary
        
        career websites/former or current employees
        
        Ask them
        
        how does the offer fit into their salary range
        
        what skills determine placement in this range
        
        Issues you care about (your BATNA RP and AP)
        
        Anything you care about can be considered as a trading opportunity
        
        Analyse trading opportunities
        
        Make strategic plan
      - what if the offer is higher than your AP?
        
        do not accept- negotiate further, or it will be a suboptimal outcome for you
  - - - Share complex information
        
        graphs, data, statistics
      - No location or time restraints
      - Reduce power differences
        
        age, appearance, status
      - Emotional safety
      - More time
        
        Analyse inside and outside offers and compare to BATNA
        
        Able to think carefully about what you want to say
        
        Research more information
        
        Help proofreading
    - - Conversation record is permanent
        
        mistakes can be costly
      - Conversation record can be shared
        
        not private, people assume it is
      - Misunderstandings are common
        
        hard to identify and correct
        
        Common misunderstandings
        
        Often assume the worst
        
        asumme the worst in long delays
        
        use a negative negotiation style in response with threats and bluster
        
        may resort to risky negotiation tactics or 'tests'
        
        Information is often lost
        
        long poorly formatted emails
        
        Assume recipients read the email quickly
        
        fail to account for other people's delays but account for their own delays
      - Difficult to build rapport, trust and relationship
        
        easy to hurt relationship
        
        job negotiations need rapport and email hurts rapport
    - - face to face also include non-verbal communication, which is three times more effective, and can help build rapport
      - if you are well prepared, face-to-face is always better
      - phone call?
        
        compared to email only, it results in bette cooperation, better working relationship and better outcomes
    - - candidate's POV
        
        don't want to seem demanding, disloyal or offend employer
      - employer's POV
        
        frustrated that they lost a candidate as they never got a chance to meet the competing offer
        
        esp if they can meet the needs easily
    - - be professional
      - proofread
      - Format email to be concise for it to be easy to understand (bullet points, bold texts)
      - establish shared norms for communication
      - Meet in person to establish rapport before email
      - communicate any reason for delay
- - - - misunderstanding and misinterpretations accumulate
      - BATNAs often linked via a third party
      - negotiation starts off confrontational and emotional, often angry
      - Harder to find any solution, let alone integrative
    - - other side will not agree that you are right
      - you will be convinced by biases that you are right
    - - Confirmation bias
        
        "we believe what we already believed"
        
        People tend to search for, interpret and remember information in a way that confirms our existing beliefs
        
        Focus on and overweight evidence that confirms prior beliefs and neglect evidence that disconfirms our beliefs
        
        Expertise knowledge does not make opinions converge, only econs will converge on the same opinion
      - Self-serving bias
        
        "we believe what we want to believe"
        
        People search for, interpret and remember information in a way that favours themselves
        
        Attributions to success or failures
        
        If I succeed it's because of internal factors
        
        If I fail it's because of external factors
        
        fairness can be viewed differently in the same situation
        
        Memory is distroted for outcomes
        
        people tend to remember good outcomes and forget bad ones
        
        bias blind spot
        
        overly optimistic beliefs
        
        self-destructive behaviour
  - - - Generally start with interests, as it helps expand and create value
      - exchanging info helps build rapport and requires trust/cooperation
      - Trust and cooperation is easier to build earlier on
      - When to stop using interests and use the other ways
        
        the other side will not negotiate at all
        
        all attempts to negotiate with interest has failed
        
        negotiation is close to an agreement and you are in the bargaining zone
        
        let partner know you will not be taken advantage of (force them to take consideration of your interests)
        
        when you can win, but only if you don't value a future relationship and you can't do better with an integrative strategy
    - - Does a weak BATNA imply you have no power over the counterpart?
        
        not if your BATNA is linked-your source of weakness may turn out to be your source of strength
        
        one party's behaviour affects or determine the other's BATNA
      - Advantages
        
        better at value claiming
      - Disadvantages
        
        worse at value creation
    - - Why is using rights undesirable?
        
        view of fair is different depending on our situation (coin flip- procedural fairness vs outcome fairness)
        
        fairness is a social perference
      - 3 problems
        
        We belive we are right and out counterpart is wrong (influences BATNA, bargaining zone, trust etc)
        
        Our view of fair depends on the situation and may be inconsistent
        
        because of perception and judgement biases, what people perceive to be fair is different
- - - - bargaining zone
        
        Zone of possible agreement, a deal can usually be struck if the zone is positive
      - BATNA
      - Reservation point
        
        The bottom line before you walk away
      - Aspiration point
    - - Anchoring bias
        
        Asking the first offer
        
        Yes
        
        If you have sufficient information
        
        No
        
        If you have no idea what’s going on
        
        Large impact, almost a quarter of the final deal
      - Negotiation envelope
        
        Target is halfway between opening offer and bottom line
      - Pattern of concessions
        
        Larger then smaller as you get close to bottom line, signals to partner that you’re not willing to go lower