Negotiation: Applied Social Psychology

Introduction to Social Psychology: Negotiation

• PSYCH 70/SOC 2, Stanford University
• Lecture focuses on negotiation as an applied social psychology topic.

Negotiation

• A decision-making process where two or more people attempt to agree on how to allocate shared resources.

Negotiation Exercises

• Negotiation Exercise 1: Used Car
  • Focuses on "distributive negotiations."
• Negotiation Exercise 2: Job Interview
  • Focuses on "integrative negotiations."

Social Psychological Principles

• Underlying both types of negotiation.

Distributive Negotiation

• Typically involves a single issue (e.g., price).
• Fixed-sum structure: one party’s gain is another party’s equivalent loss.
• Conflicting interests: each party is trying to maximize their share.

Negotiation: Key Concepts

• Reservation point or price (RP):
  • Your bottom-line or walkaway point.
  • Your BATNA (Best Alternative to Negotiated Agreement) +/- things that make you want this deal.
• Zone of potential agreement (ZOPA) or bargaining zone:
  • The space between two parties' RPs; can be negative.
• Aspiration price or point (AP):
  • An “ambitious yet plausible” desired end point.

Discovering the ZOPA

• ZOPA: Zone of Potential Agreement.
• Buyers: what was the seller’s BATNA, RP?
• Sellers: what was the buyer’s BATNA, RP?
• Example:
  • Buyer RP: $2,000$
  • Seller RP: $300$
  • Illustrates the zone between buyer and seller reservation points.
• Opening offers:
  • Can be an effective anchoring strategy, but only when you have a good sense of the ZOPA.

Understanding Others

• Naïve Realism:
  • The belief that our subjective experience is an objective, unmediated copy of reality (Lee Ross).
  • Therefore, if others don’t see it as we do, they are ignorant, irrational, or biased.
• Move beyond naïve realism to learn about others:
  • Ask them to make the opening offer.
  • Get to know them more generally, background, interests, values etc.
  • Ask direct questions.

Defining Success/The Situation

• One view of success in distributive negotiation: claiming as much of the bargaining zone as you can, getting a settlement right at your counterpart’s resistance point.
• Different definitions of success:
  1. Getting more than my reservation price.
  2. Getting at least half of the bargaining zone.
  3. Strengthening a relationship.
  4. Beating the idiot across the table from me.
  5. Not being completely humiliated in front of my [boss, colleagues, spouse, children, etc.].
• Recognize that you likely have habitual definitions of success (winning, making friends, etc.) that may or may not fit well with the situation at hand.

The Power of the Situation

• Know what you want and define success for you.
• Consider stating this explicitly and/or reframing the situation to change other’s behavior.
• Name of the Game Study
  • 2 Player Game: Cooperate or Defect?
  • Both Cooperate: Both + $</li> <li>One Defects: Defector +$$, Cooperator -$
  • Both Defect: No one gets
  • “Wall Street Game” 30% cooperate
  • “Community Game” 70% cooperate
  • Lieberman, Samuels & Ross (2004)

Influencing Others

• After you understand others and define the situation…
• Use your tactics of influence:
  • Authority (competence)
  • Liking (similarity, warmth)
  • Social Proof/ Norms
  • Commitment, consistency
  • Scarcity
  • Reciprocity
• Confessions of a car salesman
  • “… write up their last offer in the very bottom corner of the sales agreement. Take up all the room. The buyer looks at that, and sees there’s nowhere else to write. Psychologically, they feel like they’re out of space, which tells them they can’t negotiate any more. I’ve done that. It really works!”

Norm of Reciprocity

• There is an expectation that people treat others the same way that they have been treated, repaying benefits with benefits and concessions with concessions.
• Cialdini, 2001
• Reciprocity: Force Follows Force Blindly
• Reciprocity: But So Too Does Kindness/Concession

Used Cars: A few takeaways

• The actual bargaining zone defines whether a deal can happen.
  • You won’t be effective if you don’t know your real RP.
• The perceived bargaining zone governs behavior.
  • A pair of challenges: discover counterpart’s RP while shaping their perception of yours.
• The meaning and value of things may be very different for your counterpart (Naïve realism).
  • Be cautious in assuming they see things the way you do.
• By being aware of the principles of negotiation and social psychology (e.g. influence, power of the situation etc), you can be successful in distributive bargaining without lying, cheating, or playing dirty.

Job Negotiation Exercise

• Roberts, Job Candidate
• Gordon, Global Consultants

Integrative Negotiation

• Involves multiple issues, differences in priorities and interests.
• Successful outcomes involve value creation (expanding the pie), not just value claiming (slicing the pie).
• What did you learn about your partner?
  • Global/Gordon: what was important to Roberts?
  • Roberts: what was important to Gordon/Global?
  • Were there issues where you wanted the same thing?

Distributive issues

• When you value things in exactly the inverse way as your partner. The more your partner gets, the less you get … and vice versa.
• For example, salary
• Salary: Distributive Terms

Compatible issues

• When you and your partner both want the same thing … the same outcome is good for you both.
• For example, job assignment and location in job negotiation
• Job Assignment: Compatible Terms

• Location: Compatible Terms

Integrative issues

• When you and your partner have different priorities on different issues (which is almost always the case), you can trade what you want less for what you want more
• Here, you can give in on Issue A to gain ground on Issue B
• For example, health care vs. moving expenses and vacation in job negotiation
• Healthcare: Recruit Priority Terms

• Moving expenses: Global Priority Terms

• What did you learn about your partner?
  • Global/Gordon: what was important to Roberts?
  • Roberts: what was important to Gordon/Global?
  • Were there issues where you wanted the same thing?
  • What is MORE important for them than for you?

Compromising vs. integrating

• Compromising
  • Trading your priorities and your partner’s priorities
  • Splitting the difference; meeting partner halfway
  • Relatively mindless
• Integrating (or integrative bargaining, or log-rolling)
  • Effortful, active, creative

Global Consulting debrief

• Salary: Distributive Terms

• Healthcare: Recruit Priority Terms

*Location: Compatible Terms

• Compatible: Aligned interests
• Vacation: Global Priority Terms

• Integrative potential: value creating
• Distributive: value claiming
  *Job Assignment: Compatible Terms

• Moving expenses: Global Priority Terms

Global Consulting Outcomes

• Integrative bargaining involves value creation (expanding the pie), not just value claiming (slicing the pie).
• Involves multiple issues, differences in priorities
  • Many situations can be transformed into integrative situations by adding issues
• Interests-based bargaining, not just positions-based
  • Position: a deal term stance (e.g., I want Insurance Plan B)
  • Interest: underlying reason why (e.g., I need acupuncture)
• Integrative negotiation: Beyond win-lose

Review

• Negotiation Exercise 1: Used Car
  • “distributive negotiations”
  • Harnessing the situation
  • Understanding others (avoiding Naïve realism)
  • Influencing others
• Negotiation Exercise 2: Job Interview
  • “integrative negotiations”
  • All the above AND:
  • Integrating interests: growing the pie by maximizing self and other interests
• Social Psychological Principles

Personal reflection

• What do you believe you did well?
• What do you believe you could have done better?
• What lessons did you learn (about negotiation in general or yourself in particular)?