Tuesday, 23 February 2010

Bargaining and Banter...I mean BATNA.

In bargaining situations, your BATNA (your best alternative to a negotiated agreement) includes the alternatives a negotiator has outside the current negotiation e.g. "If I don't buy your car, I can buy my Uncle's car for £2,000" (Thompson, 2005, pg 78). Related to this is your target point and your resistance point. You should aim to discover this information from the other party, but there are rarely situations in which you should disclose yours.

In a class exercise we were instructed to act out the sale of a car in pairs - one the buyer and the other the seller. We were told that the car's market value was £5,000. In my pair, I took on the role of the buyer. In order to identify my BATNA I created my reasons for buying the car. I imagined that I was a car dealer buying the car for resale, so my best alternative to a negotiated agreement would be to find another seller who would offer me a better deal. I set my aspiration point at £3,000 and my resistance point at £4,500. I had to buy it for less than its market value in order to make a profit. Once negotiations had begun, we both began to realise that our settlement rages did not overlap, so neither of us were willing to shift our resistance points. I later found that the seller had decided not to sell the car for less that £4,700. If we had only been using distributive negotiations, it is likely that we would have reached deadlock and no deal would have been made.

However, we then strayed into integrative bargaining, which means that other resources are brought into the equation. I disclosed the fact that it would cost me to clean the car and have it serviced before resale. The seller then agreed to have the car cleaned before handing it over. This shifted my resistance point slightly. I explained to the seller that I would be able to pay for the car and take it off her hands as soon as it was ready. This shifted the seller's reference point slightly. The seller then explained that the car has a new satellite navigation system installed (which I knew to be worth a few hundred pounds) and that I could keep the music system. This shifted my reference point a lot because I would be able to sell the car for well over the market value with these extras. As a result, we finally agreed on £4,650.

My partner and I did what theorists would call 'expanding the pie'. The trigger was when we began to share information with each other: "Negotiations would not go anywhere if negotiatiors did not communicate their interests to the other party...[however]...A negotiator should never ask the other party a question that he or she is not willing to answer truthfully" (Thompson, 2005, pg 80). We shared some of our issues, but not our resistance points. Once we discovered what issues were affecting the bargaining, we began to think of ways we could help each other resolve them: "To capitalise on different strengths of preference, negotiators need to compare and contrast issues and trade them off" (Thompson, 2005, pg 81).

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