Art of Negotiation Exam 1

What is negotiation?

An interpersonal decision-making process necessary whenever we cannot single-handedly achieve our objectives.

What three things does negotiation come down to?

People, communication, and influence.

TRUE or FALSE: Most negotiations are fixed-pie, distributive, or zero-sum situations.

False

What is the opposite of a fixed-sum negotiation?

Variable-sum.

What is the opposite of distributive negotiation?

Integrative negotiation.

What is the opposite of a zero-sum outcome?

A win-win outcome.

TRUE or FALSE: A good negotiator must choose between being either tough or soft.

False

TRUE or FALSE: Good negotiators are born with natural negotiating ability.

False

TRUE or FALSE: Experience alone is the best teacher for becoming a better negotiator.

False

TRUE or FALSE: Good negotiators should generally take risks.

False

TRUE or FALSE: Good negotiators primarily rely on intuition.

False

What is the 80/20 rule of negotiation?

Approximately 80% of the effort should be preparation and 20% should occur during the actual negotiation.

What are the three forms of fixed-pie negotiation listed in the notes?

Battle of wills, mutual compromise, and combination.

What does "mixed motive" mean in negotiation?

Negotiation can involve both competitive and cooperative motives.

What are the three major components of effective negotiation?

Self-assessment, assessment of the other party, and assessment of the situation.

What is the main question you should answer during self-assessment?

"What do I want?"

What should a negotiator establish when determining what they want?

A target point, also called an aspiration point.

What are the three types of negotiators mentioned under target/aspiration points?

Underaspiring, overaspiring, and grass-is-greener negotiators.

What does BATNA stand for?

Best Alternative To a Negotiated Agreement.

In simple terms, what is your BATNA?

What you will do if you walk away from the negotiation.

TRUE or FALSE: BATNA helps you determine when you should walk away from a negotiation.

True

TRUE or FALSE: A stronger BATNA gives a negotiator more leverage.

True

When should you accept an agreement in relation to your BATNA?

Accept terms that are better than your BATNA.

When should you reject an agreement in relation to your BATNA?

Reject terms that are worse than your BATNA.

TRUE or FALSE: Once you establish your BATNA, it should remain static throughout the negotiation.

False

TRUE or FALSE: Your BATNA should be based on what you hope will happen.

False

TRUE or FALSE: Your target point and BATNA are the same thing.

False

Why shouldn't a negotiator "fall in love" with their first option?

Because becoming attached to one alternative can prevent the negotiator from recognizing or developing better alternatives and a stronger BATNA.

What is a reservation point (RP)?

The point in a negotiation where you are still willing to accept the agreement, but you have reached your limit.

What does the reservation point represent?

A quantification of a negotiator's BATNA with respect to other alternatives.

TRUE or FALSE: Your reservation point represents what you ideally hope to achieve in a negotiation.

False

What four steps can be used to determine your reservation point?

Brainstorm your alternatives, evaluate the alternatives, improve your BATNA, and determine your reservation point.

TRUE or FALSE: Improving your BATNA can strengthen your position in a negotiation.

True

What are sunk costs?

Costs that have already occurred and cannot be recovered.

TRUE or FALSE: Sunk costs should influence whether you accept a future negotiation agreement.

False

What is risk aversion?

A preference for avoiding risk or choosing a more certain outcome, especially when dealing with potential gains.

What is risk seeking?

A greater willingness to take risks, especially when dealing with potential losses.

TRUE or FALSE: People generally become more risk seeking when dealing with gains.

People tend to be more risk averse with gains and more risk seeking with losses.

What is counterfactual thinking?

Thinking about what might have happened but did not actually occur.

What is the sure thing principle?

If X is preferred to Y whether event A occurs or does not occur, then X should still be preferred when it is unknown whether A will occur.

What is the overconfidence effect?

Unwarranted confidence in one's judgment or abilities that can cause a person to overestimate positive events and underestimate negative events.

TRUE or FALSE: Overconfidence can cause a negotiator to underestimate the likelihood of negative outcomes.

True

What should you assess about the other party before negotiating?

Their hidden table, target point, BATNA, and reservation point.

What is the "hidden table" in negotiation?

Important people who influence the negotiation but are not actually at the negotiating table.

TRUE or FALSE: Only the people physically participating in the negotiation can influence its outcome.

False

According to the notes, what is the most useful and accurate way to learn the other party's reservation point and target point?

Ask them.

Assessing the other party involves considering their BATNA as well as your own.

True

What are the three broad assessments involved in effective negotiation?

Self-assessment, assessment of the other party, and assessment of the situation.

What should you determine about the duration or frequency of a negotiation?

Whether it is one-shot, long-term, or repetitive.

What should you determine about the nature of the negotiation?

Whether it is an exchange or a dispute.

What distinguishes an exchange from a dispute in the notes?

The alternatives available if an agreement is not reached at the end of the process.

What are linkage effects?

When one negotiation affects other negotiations.

TRUE or FALSE: A negotiation should always be evaluated completely independently from other negotiations.

False

What question should a negotiator ask concerning linkage effects?

"Are linkage effects present?"

Why should you determine whether an agreement is required?

Because whether an agreement is necessary affects your alternatives and negotiating position.

What three time factors should be considered when assessing a negotiation?

Deadlines, time-related costs, and time horizon.

What is a time horizon?

The amount of time between the negotiation and the consequences of the negotiated agreement.

TRUE or FALSE: A deadline is the only time-related factor that matters in negotiation.

False

What should you determine about the number of offers in a negotiation?

Whether the negotiation involves more than one offer.

When is the best time to begin building trust and establishing rapport?

Before the negotiation, although trust should continue to be built during the negotiation.

TRUE or FALSE: If you cannot establish trust before a negotiation, you should not attempt to build it during the negotiation.

False

What is one simple way to build trust during negotiation?

Show Respect.

TRUE or FALSE: Showing respect can help establish trust between negotiating parties.

True

What are the two storytelling approaches listed in the notes?

The Tell version and the Show version.

You are negotiating a salary. You hope to earn $60,000. What does the $60,000 represent?

Your target point / aspiration point.

You are negotiating with Company A, but Company B has already offered you a $50,000 job. What does Company B's offer represent?

Your BATNA

You are negotiating a salary and determine that you will not accept anything below $52,000. What does $52,000 represent?

Your reservation point.

You spent $500 preparing for a negotiation. The money cannot be recovered. What is the $500?

A sunk cost.

A negotiator chooses a guaranteed $5,000 gain instead of risking it for the possibility of receiving more. What behavior does this demonstrate?

Risk aversion.

A negotiator facing a certain loss decides to gamble on a risky alternative that might eliminate the loss. What behavior does this demonstrate?

Risk seeking.

After a negotiation, someone repeatedly thinks, "What if I had made a different offer?" What concept does this demonstrate?

Counterfactual thinking.

A manager isn't present at the negotiation, but the negotiator must receive the manager's approval before accepting the agreement. What concept does this demonstrate?

The hidden table.

A company's negotiation with one supplier could affect its upcoming negotiations with several other suppliers. What concept does this demonstrate?

Linkage effects.

A negotiator becomes so confident in their abilities that they underestimate the possibility that negotiations could fail. What concept does this demonstrate?

The overconfidence effect.

What is the easiest way to remember Target Point, Reservation Point, and BATNA?

Target = what I WANT 🎯 | Reservation = my LIMIT 🛑 | BATNA = what I DO if I WALK AWAY 🚪