Negotiation: theory, styles and practice
Negotiation: theory, styles and practice
This domain tests the vocabulary of bargaining: distributive versus integrative negotiation, positions versus interests, BATNA, reservation value and ZOPA, and how preparation and concession strategy affect outcomes. It also tests ethical and authority limits.
Core concepts
- Distributive bargaining treats a fixed pie; it is competitive, with anchoring and guarded information.
- Integrative bargaining seeks joint gains by trading issues of differing value ('logrolling') and exploring interests behind positions.
- Positions are stated demands; interests are underlying needs, concerns and priorities.
- BATNA is the best alternative to a negotiated agreement if talks fail. It is not the bottom line; it is the objective fallback.
- Reservation value is the least favourable point at which a deal beats the BATNA.
- ZOPA is the zone of possible agreement between the parties' reservation values. No overlap means no rational deal on those terms.
- Anchoring, first offers, concession patterns and framing shape perceptions of the ZOPA.
Worked example
A supplier's BATNA is a $70,000 contract elsewhere. Its reservation value for the current deal is therefore about $70,000 plus transaction costs, say $72,000. The buyer's BATNA is a $95,000 alternative; its reservation value is about $95,000. On price alone, the ZOPA is roughly $72,000-$95,000. If the supplier opens at $120,000, that is an anchor outside the buyer's reservation value and may damage credibility. If the buyer discovers the supplier can deliver in two weeks while the alternative takes six, delivery time may be worth more to the buyer than price; an integrative trade (higher price for faster delivery) can expand the ZOPA.
Practice points
Prepare facts, interests, BATNA, reservation value, authority and tradeables. Separate people from problems, focus on interests, generate options before deciding, and use objective criteria. Record any settlement clearly. Negotiation privilege is not uniform; 'without prejudice' protection depends on jurisdiction and context.
Traps
- Confusing BATNA with the opening offer or bottom line.
- Assuming a ZOPA exists because talks are happening.
- Revealing your reservation value through careless concession patterns.
- Negotiating without authority, then purporting to bind a client.
- Treating a 'without prejudice' label as a universal cloak.