Judgment in Managerial Decision Making 8 e Chapter

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Judgment in Managerial Decision Making 8 e Chapter 10 Making Rational Decisions in Negotiations

Judgment in Managerial Decision Making 8 e Chapter 10 Making Rational Decisions in Negotiations Copyright 2013 John Wiley & Sons

Game Theoretic Approaches • Provides precise prescriptive advice • Relies on describing all outcomes

Game Theoretic Approaches • Provides precise prescriptive advice • Relies on describing all outcomes • Assumes all parties are rational

A Decision Analytic Approach to Negotiation • Describes the behavior of counterparts • Prescribes

A Decision Analytic Approach to Negotiation • Describes the behavior of counterparts • Prescribes advice from counterpart behavior • Analytical framework – Alternatives to negotiated agreement – Each party’s set of interests – Relative important of interests

Alternative to a Negotiated Agreement • Best Alternative to Negotiated Agreement • Reservation point

Alternative to a Negotiated Agreement • Best Alternative to Negotiated Agreement • Reservation point • Many accept offers below BATNA

The Interests of the Parties • Identifying counterpart interests is key • Focusing on

The Interests of the Parties • Identifying counterpart interests is key • Focusing on deeper interests • Understanding the importance of issues

Claiming Value in Negotiation A new MBA is being recruited for a highly specialized

Claiming Value in Negotiation A new MBA is being recruited for a highly specialized position. The organization and the employee have agreed on all issues except salary. The organization has offered $90, 000, and the employee has counteroffered $100, 000. Both sides believe they have made fair offers, but they both would very much like to reach an agreement. The student, while not verbalizing this infor mation, would be willing to take any offer over $93, 000 rather than lose the offer. The organization, while not verbalizing this information, would be willing to pay up to $97, 000 rather than lose the candidate.

Creating Value in Negotiation • Many negotiations involve multiple issues • Value creation –

Creating Value in Negotiation • Many negotiations involve multiple issues • Value creation – 1978 Camp David Accords – Trading on issues to create value – Creating value through bets • • Build on differences Mange biases Diagnose disingenuous parties Establish performance incentives

The Tools of Value Creation • • • Build trust and share information Ask

The Tools of Value Creation • • • Build trust and share information Ask questions Strategically disclose information Negotiate multiple issues simultaneously Make multiple offers simultaneously Search for post settlements

Key Preparation Questions • • What is your BATNA? What are the issues? How

Key Preparation Questions • • What is your BATNA? What are the issues? How important is each issue? What is your counterpart’s BATNA? Are there value creation opportunities? Is there disagreement about predictions? How will you obtain information?

Advanced Judgment 1 ADVANCED JUDGMENT JUDGMENT Advanced JudgmentAdvanced Judgment 1 ADVANCED JUDGMENT JUDGMENT Advanced Judgment
Intermediate Judgment 1 INTERMEDIATE JUDGMENT JUDGMENT Intermediate JudgmentIntermediate Judgment 1 INTERMEDIATE JUDGMENT JUDGMENT Intermediate Judgment
Basic Judgment 1 BASIC JUDGMENT JUDGMENT Basic JudgmentBasic Judgment 1 BASIC JUDGMENT JUDGMENT Basic Judgment
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