NEGOTIATION RATIONALLY:

THE POWER AND IMPACT OF THE NEGOTIATOR’S FRAME

Juliane ArndtSebastian GaborAlexander

Shopov

WHAT IS A NEGOTIATION?

How to improve negotiation skills:

Effective use of information about the issue

Being aware of the behaviour of the opponent

Make more rational decisions

TIPS:

Psychological forces

Evaluate the opponents behaviour

General goal: Reaching good agreements, not only an

agreement

FREQUENT PROBLEMS OF NEGOTIATORS

Framing

Prejudices

Usage of irrelevant information

Relying on readily available information

Being overconfident

FRAMING

How does it influence?

Choosing the frame?

Case I You are in a store about to buy a new watch,

which cost $70. As you wait for the sales clerk, a friend of yours comes by and remarks that she has seen an identical watch on sale in another store two blocks away for $40. You know that the service and reliability of the other store are just as good as this one. Will you travel two blocks to save $30?

CASE II

You are in a store about to buy a new video camera that costs $800. As you wait for the sales clerk, a friend of yours comes by and remarks that she has seen an identical camera on sale inn another store two blocks away for $770. You know that the service and reliability of the other store are just as good as this one. Will you travel two blocks to save the $30?

ANALYSIS

Possibilities: First scenario: 90% of the managers would travel

two blocks Second scenario: only 50% would travel two

blocks Reasons:

$30 discount for $70 watch -> good deal ; $30 discount for $800 camera not such a good

deal

Case show importance of frames: we have to be aware of them in order to make good decisions

FRAMING OF RISKY NEGOTIATIONS

Framing affects perception

Subjective

gain from the current situation loss from the expected gain

EXAMPLE

Employee is expecting a significant increase in salary.

He frames expectations to a raise of $5000. Because of the recession he receives only

$3500. However, the average salary increase was

$2000.

Depending on the frame: Gain : 3500 – 2000 = $1500 Loss: 5000 – 3500 = $1500

REFERENT POINTS IN NEGOTIATING SALARY

1. Current salary

2. Company’s initial offer

3. The least one is willing to accept

4. The estimate of the most the company is

willing to pay

5. The initial salary request

NEGOTIATION FRAMES

One can negotiate to:

Increase a gain Reduce a loss

Economically they are the same.

Positive negotiation leads to more closed deals!

THE ENDOWMENT EFFECT

Owners change the relationship of the commodity

Higher value

Attachment is

formed

EXAMPLE

Sellers = $7.12

Buyers = $3.12

Value of a

commodity is

subjective

Coffee Mug

FRAMING

Organize information What’s positive for one party may be

negative for other Create positive frames – present different

perspectives

What the other side has to gain

THANK YOU FOR YOUR ATTENTION !