Negotiation Subprocesses. By Carolina Eder Annalena Koehler Anton Hristov Vilhelm Öhrn. Negotiation. Everyone uses negotiation in day to day life. Negotiation is a process in which a group or involved parties resolve matters, by discussing and coming to an agreement.
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Negotiation Subprocesses By Carolina Eder Annalena Koehler Anton Hristov Vilhelm Öhrn
Negotiation • Everyone uses negotiation in day to day life. • Negotiation is a process in which a group or involved parties resolve matters, by discussing and coming to an agreement.
Negotiating Rationally: The power and Impact of the Negotiator´s Frame • To analyze negotiation rationally the negotiator has to understand the psychological forces which have a big impact on the negotiator´s effectiveness.
Negotiator frame • Structure problems • Processes information • Frame the situation
Framing of Negotiations Ex.1 • Situation adapted from Russo and Schoemaker • Difference between the two situations • Actually for both it should be worth it to invest the same amount of time • First Scenario – Very Good deal • Second Scenario – Not that attractive • Frame represents percentage of discount
Framing of Negotiations Ex.2 • Situation Richard Thaler • Content • In both versions, the result is the same. • No negotiation with the seller • Percentage of elasticity of the demand of the product • Frame – high cost is expected at hotel • High cost is considered “rip-off” in the store
Conclusion (Framing of Negotiation) • Those two examples show how important framing is to solve problems and make Decisions
Framing of Risky Negotiations • Framing potential gains or potential losses • Framed either as “gains” or “losses” • Gains of similar value – prefer certainty over lottery • Losses of sim. Value – prefer lottery over certainty • Example : $3500 gain considered a loss • Personal goal was a $5000 increase • Frame based on available information • (info not known – average raise = $2000)
Reference point/Base Line • Crucial in forming the Frame • Basis for evaluating if option is a gain or loss • Determine our willingness to accept/reject an option • It is a result of our expectations • Usually what we own is our automatic reference point
Endowment Effect • “Buyer” and “Seller” have different reference points • Seller – personal attachment to the object he owns • Values this attachment, therefore puts higher value • Buyer is not attached, he estimates a lower value for an object • Ex: Coffee Mug priced from $.50 to $.9.50 • Sellers - $7.12 • Buyer – $2.88 (closer to market value) • Chooser - $3.12 (get $ or mug, no buying/selling)
Framing, Negotiation Bias and Strategic Behavior • Strategically manipulate framing to direct negotiation performance • Framing the options in terms of potential gain • Situation perceived as more favorable • Same option Framed in terms of losses • Lower chance of a favorable perception