Negotiations 3-7
Discuss the significance of procedural justice during negotiation.
In addition to their slice of the pie, people are concerned with the way resources are distributed. People evaluate not only the fairness of outcomes but also the fairness of the procedures by which those outcomes are determined. Listening to the other party, treating them with respect, and explaining oneself are related to outcome satisfaction and the desire for future negotiations. People's evaluations of the fairness of procedures determine their satisfaction and willingness to comply with outcomes.
Discuss the guidelines for distribution of resources.
The guidelines for distribution of resources are: 1. Consistency: One of the hallmarks of a good pie-slicing heuristic is consistency or invariance across settings, time, and respect to the enforcer of the procedure. 2. Simplicity: Pie-slicing procedures should be clearly understood by the individuals who employ them and those who are affected by them. 3. Effectiveness: Pie-slicing policies should produce a choice, meaning that the allocation procedure should yield a clear decision. 4. Justifiability: Pie-slicing procedures should be justifiable to other parties. 5. Consensus: Group members should agree upon the method of allocation. 6. Generalizability: The pie-slicing procedure should be applicable to a wide variety of situations. 7. Satisfication: To increase the likelihood that negotiators will follow through with their agreements, the pie-slicing procedure should be satisfying to all.
Explain the criteria under which contingency contracts are effective.
Capitalizing on differences often entails contingency contracts, wherein negotiators make bets based upon different world occurrences. For contingency contracts to be effective, they should satisfy the following four criteria: First, they should not create a conflict of interest. For example, if a book author, optimistic about sales, negotiates a contingency contract with her publisher such that royalty rates will be contingent upon sales, the contract should not create an incentive for the publisher to attempt to thwart sales. Second, contingency contracts should be enforceable and therefore often may require a written contract. Third, contingency contracts should be clear, measurable, and readily evaluated, leaving no room for ambiguity. Conditions and measurement techniques should be spelled out in advance. Further, a date or time line should be mutually agreed upon. Finally, contingency contracts require continued interaction among parties.
Describe the multiple-offer strategy for negotiations.
The strategy of making multiple offers of equivalent value simultaneously can be effective even with the most uncooperative of negotiators. The strategy involves presenting the other party with at least two (and preferably more) proposals of equal value to oneself. The threefold multiple-offer strategy includes the following: a) Devising multiple-issue offers, as opposed to single-issue offers (to get away from sequential bargaining, which can lock people into lose-lose outcomes). b) Devising offers that are all of equal value to yourself (i.e., leaving yourself many ways to get what you want before making a concession). c) Making all the offers at the same time. This last point is the hardest for most people to do because they negotiate like playing tennis: They make one offer and then wait for the other party to 'return' a single offer; then they make a concession, and so on. However, the other party should be cautioned that cherry-picking is not permissible.
A contingency contract is often required when negotiators ________. A) capitalize on their differences B) must get the contract ratified by others C) reach a consensus about the future D) find that their views coincide
a
Negotiators who focus on their target points do better in terms of slicing the pie but these negotiators do not feel as satisfied as negotiators who focus on their reservation point or BATNA. This is known as the ________. A) goal-setting paradox B) chilling effect C) winner's curse D) minimal group paradigm
a
Once you have made an offer, you should ________. A) wait for other party's response before revising it B) revise it only if it exceeds the party's target point C) revise it if it falls in the bargaining zone D) avoid revising it and try to make it your final offer
a
Reaching a level 2 agreement, in which negotiators create value with respect to a given negotiated outcome by finding another outcome that all prefer, implies that ________. A) the bargaining situation is not purely fixed-sum B) the level 1 agreement was a failure C) the parties' reservation points have not been reached D) a level 3 integrative agreement is not possible
a
Robert wants to sell his old table to Mike. The lowest price Robert is willing to accept is $75 but he wishes to sell it at $105. The highest price Mike is willing to pay for the table is $82 but he wishes to purchase it at $73. What is the value of the bargaining zone? A) $7 B) $23 C) $2 D) $32
a
The negotiators of two companies do not succeed in aligning their terms of agreement despite the fact that both desired the same outcome. What is this situation known as? A) the lose-lose effect B) the Pareto-optimal frontier C) integrative negotiation D) logrolling
a
To be effective, a contingency contract requires that there be ________. A) no conflict of interest B) one-time interaction C) no difference of opinion D) no enforceability
a
Which of the following fairness principles prescribes equal shares for all? A) blind justice B) equity rule C) welfare-based allocation D) reciprocal rule
a
Which of the following is a negotiation method in which parties avoid escalating conflict to reach mutual settlement within the bargaining zone? A) the GRIT model B) a blue ocean strategy C) Porter's Five Forces model D) the Diamond model
a
Which of the following is most likely to increase the chances of an integrative negotiation? A) tradeoffs between parties B) reaching the middle ground C) an even split division D) single-issue negotiation
a
Which of the following types of comparisons is most likely to inspire people to greater achievement? A) upward comparison B) horizontal comparison C) downward comparison D) lateral comparison
a
William and Ben are negotiating a maintenance contract. To maximize his slice of the pie, William should ensure that the settlement is as close to ________ as possible. A) Ben's reservation point B) his own reservation point C) Ben's target point D) the central point in the bargaining zone
a
Bonet Inc. and Madison & Co. are on the verge of beginning negotiation talks with regard to a tentative merger. However, the management of both companies can't agree on the kind of manufacturing technology to be employed once the companies merge. As neither wants to forgo the merger, the intermediaries decide to chalk out a presettlement settlement (PreSS). Which of the following conditions must be satisfied in order for the settlement to hold good? A) The PreSS must occur after the negotiations and should be designed to be replaced by a long-term agreement. B) The PreSS should occur in advance of the parties undertaking full-scale negotiations and is designed to be replaced by a long-term agreement. C) The PreSS must occur in advance of the parties' undertaking full-scale negotiations and cannot be replaced by a long-term agreement. D) The PreSS must occur after full-scale negotiations and negotiators must agree to explore other options with the goal of finding another that both prefer.
b
During a negotiation you should ________. A) set your aspirations low in order to avoid disappointment later B) make your first offer slightly lower than the other party's reservation point C) make sure that your first offer creates the chilling effect D) set your reservation point slightly higher than the other party's target point
b
In which of the following cases would an equity-based allocation of resources be most indicated? A) The Accounts team received a cash reward for being the top-performing team in the company. The team decided to split the cash among all members. B) A popular course at a university attracts a large number of candidates because the course is subsidized. The university needs to allot the few seats among the many applicants. C) An organization that collects funds for charity receives applications from a number of charities each year. D) A start-up is in the process of arranging healthcare insurance for its employees.
b
Negotiators can capitalize on the reciprocity principle by ________. A) both parties keeping high aspiration points B) both parties sharing information about their interests C) both parties keeping low aspiration points D) both parties hiding their reservation points
b
Negotiators often use one of three fairness principles when it comes to slicing the pie. Which of the following is one of these three principles? A) the procedural rule B) the needs-based rule C) the traceability rule D) the reciprocal rule
b
The ________ occurs when the negotiator's first offer is immediately accepted by the counterparty. A) framing effect B) winner's curse C) distinction bias D) chilling effect
b
The final settlement of a negotiation will fall somewhere ________. A) above the buyer's target point and below the seller's reservation point B) above the seller's reservation point and below the buyer's reservation point C) below the buyer's target point and above the seller's reservation point D) above the buyer's reservation point and below the seller's target point
b
The first offer that ________ acts as a powerful anchor point in negotiation. A) creates the focusing effect B) falls within the bargaining zone C) creates the chilling effect D) sets low aspirations
b
The multiple-offer strategy is based on the strategy of ________, meaning that a negotiator can deduce what the other party's true interests are and where the joint gains are. A) relational accommodation B) inductive reasoning C) substantiation D) logrolling
b
The total surplus of the two negotiators adds up to the size of the ________ surplus. A) target B) bargaining C) reservation D) participative
b
Welhome Realty, a real estate giant, hires agents to help it out with the sale of land. As the standard pay package would not be motivating enough for the agents' performance, the owner decides to provide them with incentives. Per the scheme, for every piece of land that is sold above the market price, the agents will receive 10% of the differential amount as bonus in addition to their salary for sale at market price. Which of the following satisfies the condition for a contingency contract? A) The real estate giant encourages a written contract for the sale of land at the market price but does not do the same for the brokers. B) The real estate giant offers 10% of any value sold above the market price and makes a written contract for the same. C) It is difficult to make a correct estimation of the market value of given piece of land. D) The real estate giant offers 10% of any value sold above the market price at his discretion.
b
What is the illusion of transparency? A) A negotiator has more information about the other party than the other party is aware of. B) The negotiators believe that they are revealing more than they actually are. C) The negotiators keep their aspiration points clear with each other. D) The negotiators disclose their BATNAs to each other but one or both of them is lying.
b
Which of the following is an instance of the application of the needs-based rule? A) the U.S. legal system B) the U.S. welfare system C) the freemarket system D) the two-party system
b
Which of the following is likely to be counter-productive in any negotiation? A) compromise B) substantiation C) making side deals D) even splits
b
Which of the following most indicates that a party in a negotiation would be willing to accept a contingency contract? A) The negotiators have the same strengths. B) One of the negotiators has a loss-frame. C) The negotiators have points for trade off. D) Both negotiators share a gain-frame.
b
Which of the following rules of fairness is most likely to be related to incidents involving nurturing and personal development? A) the equality rule B) the needs-based rule C) the equity rule D) the reciprocal rule
b
You are negotiating an important sales contract for your organization. Which of the following, if true, would increase the risk of you being anchored by the other party's opening offer? A) You have a weak BATNA. B) You have not yet planned your opening offer. C) The other party's opening offer is less than your reservation point. D) The other party's opening offer falls in the bargaining zone.
b
________ occurs when people believe that their interests are incompatible with the other party's interests when, in fact, they are not. A) False optimism B) Illusory conflict C) Premature concession D) The illusion of transparency
b
According to the fixed-pie perception, ________. A) a negotiator believes that he must get what the other party is not willing to part with B) a negotiator believes that the other party has the same interests as his own C) a negotiator believes that the other party has interests contrary to his own D) a negotiator believes that the other party has interests that overlap with his own
c
Anne is offered a lucrative offer from Katapult Inc. which she is unwilling to give up. The only downside to the offer is that she will be required to travel, which conflicts with her desire to spend time with her family. She tries to negotiate with management so that they make concessions for her. Which of the following satisfies the condition for Anne to reach a win-win agreement with management? A) Both parties have the same interests and preferences across all the negotiation issues. B) Both parties adopt an inflexible approach with regard to their terms and conditions. C) Both parties have different strengths of preference across negotiation issues. D) Both parties are strictly cautioned not to make side deals or side payments.
c
Ben is negotiating a sales contract. The most valuable piece of information Ben can have about the counterparty is ________. A) the counterparty's target point B) the negotiator's surplus expected by the counterparty C) the counterparty's reservation point D) the bargaining surplus expected by the counterparty
c
In which of the following cases is a settlement along the Pareto-optimal frontier impossible? A) The negotiation is a fixed-sum negotiation. B) Both parties are willing to make concessions. C) The sum of one outcome is greater than the other. D) Both parties are willing to trade off certain points.
c
It is an almost universal norm that concessions take place in a quid pro quo fashion, meaning that negotiators expect ________. A) that the party who made the opening offer should make the highest concession B) the opening offer to be the anchoring offer C) a back-and-forth exchange of concessions between parties D) the final offer to be very close to the opening offer
c
Negotiations are said to have a mixed-motive nature because ________. A) negotiators are motivated to maximize the bargaining surplus B) negotiators find it difficult to determine the other party's reservation point C) negotiators are motivated to cooperate as well as compete with each other D) negotiators try to settle the agreement at the central point in the bargaining zone
c
Once you have offered a concession, you should wait for the counterparty before making further concessions. This conclusion rests on which of the following assumptions? A) Your counterparty has a very low reservation point. B) Unilateral concessions decrease the size of the bargaining zone. C) Your counterparty's offer is not at their reservation point. D) Your counterparty's first offer is now the anchor point.
c
The free market system in the United States is an example of the ________ rule. A) equality B) welfare-based allocation C) equity D) needs-based allocation
c
The negotiators of ApriCots Inc. and Fortywinks Co. are deep in negotiations. Though each company has its own perspectives, the talks have been smooth sailing so far. Which of the following could act as a bottleneck in reaching win-win agreements? A) mirroring B) logrolling C) substantiation D) unbundling
c
The zone of possible agreements (ZOPA) is the range between A) the buyer's and the seller's target points B) the seller's target point and the buyer's reservation point C) the buyer's and the seller's reservation points D) the buyer's target point and the seller's reservation point
c
What does logrolling imply? A) making an initial demand beyond the zone of acceptability B) capitalizing on differences by making bets based upon different world occurrences C) trading off in order to benefit from divergent strengths of preference D) making the initial demand within the zone of acceptability
c
Which of the following is known as an anchor point? A) the offer which creates the chilling effect B) the highest target point in the negotiation C) the first offer made during the negotiation D) the lowest reservation point during the negotiation
c
Which of the following is least likely to lead to a lose-lose negotiation? A) illusory conflict B) fixed-pie perception C) logrolling D) substantiation
c
Which of the following represents the characteristics of presettlement settlements (PreSS)? A) informal, long-term and partial B) unilateral, long term and formal C) formal, initial and partial D) formal, complete and unilateral
c
Which of the following statements is true regarding a bargaining zone? A) The negative bargaining zone indicates that there is no positive overlap between the parties' target points. B) The bargaining zone is the range between the negotiators' target points. C) The final settlement of a negotiation will fall somewhere below the seller's reservation point and above the buyer's target point. D) In a positive bargaining zone, negotiators' reservation points overlap.
c
Which of the following statements is true regarding effective concessions? A) The party who made the opening offer should avoid making any concessions to its offer. B) To maximize their slice of pie, the negotiators should make larger and more frequent concessions. C) Negotiators should offer only a single concession at a time and avoid frequent concessions. D) Negotiators should make consistently greater concessions than the counterparty.
c
Which of the following statements is true regarding face threat sensitivity (FTS)? A) People with high FTS have little or no ability to detect and respond to face threats. B) A seller who has little or no reaction to a face threat is said to have high FTS. C) A negotiator's FTS is the likelihood of having a negative reaction to a face threat. D) In employment negotiations, job candidates are less likely to make win-win deals if they have
c
______ concessions are concessions made by one party. A) Distributive B) Singular C) Unilateral D) Representative
c
An Ohio resident is trying to sell her house for which she had paid $540,000 two years ago. Though she is ready to sell it at the original price, research into the market value tells her that a house of similar size in Ohio is worth $580,000 at this time. The house is in unrepaired condition and the estimated repair charge is $125,000. She has tried unsuccessfully to sell the house five times over and is moving for good to St. John's to live with her ailing mother at the end of the month, where she plans to buy a comparable property for $ 385,000. She wants to pay for the property at St. John's immediately and does not have any other sources of finance. There are a few buyers who have shown interest in the Ohio home. Which of the following options can solve her problem and can lead to a win-win agreement between the parties? A) Buyer A agrees to pay $580,000. However, as the amount is large, he agrees to pay the amount over three years in installments. B) Buyer B is willing to pay $ 540,000, which is the market price rather than the original price, in installments over two years. C) Buyer C agrees to pay $ 500,000 but says he will deduct the repair charges from the amount. D) Buyer D says that he can't pay more than $ 400,000, as he has limited funds, but is ready to close the deal quickly.
d
Anne is offered a lucrative offer from Katapult Inc. which she is unwilling to give up. The only downside to the offer is that she will be required to travel, which conflicts with her desire to spend time with her family. She tries to negotiate with management so that they make concessions for her. Which of the following satisfies the condition for Anne to reach a win-win agreement with management? A) Both parties have the same interests and preferences across all the negotiation issues. B) Both parties adopt an inflexible approach with regard to their terms and conditions. C) Both parties have different strengths of preference across negotiation issues. D) Both parties are strictly cautioned not to make side deals or side payments.
d
During a negotiation which of the following is likely to result in greater profit? A) making your first offer your final offer B) focusing on avoiding negative outcomes C) setting easy and nonspecific goals D) setting high aspirations and focusing on them
d
How do negotiators with high epistemic motivation influence a negotiation in their own favor? A) They are motivated to find the quickest solution. B) They possess a lot of nondiagnostic information. C) They tend to exaggerate or lie about their BATNA. D) They ask more questions in a quest for structure.
d
In a negotiation, the issue mix ________. A) occurs when one negotiator misunderstands the other B) occurs when negotiators' preference strengths coincide C) is the conflict between negotiators' desires D) is the union of both parties' considerations
d
Lewicki and Stark identified five types of behavior that some consider to be unethical in negotiations. One of them is traditional competitive bargaining. Which of the following is an example of traditional competitive bargaining? A) inappropriate information gathering B) denying information that weakens your position C) attempting to get your opponent fired D) exaggerating an initial offer or demand
d
Negotiations that contain only one issue are always ________. A) presettlement settlements B) equal-concession negotiations C) illusory conflicts D) purely distributive negotiations
d
Robert is negotiating a contract. In which of the following situations is it appropriate for Robert to reveal his reservation point? A) Robert knows that the other party has a great BATNA and an aggressive reservation price. B) Robert has a poor BATNA and a weak reservation price. C) Robert knows the other party's target point and finds it high. D) Robert does not have time to negotiate and senses that the bargaining zone may be very small.
d
Samantha is negotiating a contract. Which of the following is likely to be the most difficult problem she faces during the negotiation? A) determining her own target point B) analyzing the terms of the contract C) understanding the legalities of the contract D) identifying the other party's reservation point
d
The belief that the other party has interests diametrically opposite to the party's own interests is explained by the term ________. A) premature concession B) Boulwarism C) positional bargaining D) fixed-pie perception
d
The equity rule states that ________. A) output should be distributed without regard to input B) benefits should be proportional to need C) everyone should receive equal benefits D) distribution should be proportional to a person's contribution
d
The multiple-offer strategy involves ________. A) devising multiple single-issue offers B) devising offers that split the difference between the parties C) making all the offers sequentially D) devising offers that are all of equal value to yourself
d
The party who ________ obtains a better final outcome. A) focuses on avoiding negative outcomes B) sticks to their reservation point C) sets low aspirations D) makes the first offer
d
The positive difference between the settlement outcome and the bargainer's reservation point is the ________ surplus. A) reservation B) target C) bargaining D) negotiator's
d
The strategy of making one's first offer one's final offer is known as ________. A) illusion of control B) the blue ocean strategy C) the gambler's fallacy D) boulwarism
d
What does the Pareto-optimal frontier of agreement imply? A) maximum value for one party, none for the other B) maximum value for only one of the parties C) no value for either of the parties D) maximum value for both parties
d
What happens at level 1 of integrative agreements in the pyramid model? A) Agreements remain at the "no agreement" level. B) Negotiators are apt to make large concessions. C) Negotiators manipulate the others' negotiation points. D) Agreements exceed parties' reservation points.
d
What happens at the third level of the pyramid model of integrative agreements? A) Negotiators reach an agreement below both parties' reservation points. B) Both parties' reservation points are too high to reach an agreement. C) Negotiators fail to reach an agreement when the bargaining zone is positive. D) Both parties achieve an agreement that cannot be improved for one party without harming the other party.
d
Which of the following best describes a "flower child" negotiator? A) one who adopts a tough, hard stance to negotiate successfully B) one who claims resources rather than expanding the pie C) one who believes that adopting a soft stance can lead to successful negotiations D) one who is so busy expanding the pie that he or she forgets to claim resources
d
Which of the following best describes a false conflict? A) A conflict that involves people who are interested in solving a problem and are willing to listen to each other. Such conflicts are constructive, support the company's goals, and improve performance. B) A conflict in which one person's opinions, ideas, or beliefs are incompatible with those of another, and the two seek to reach an agreement of opinion. C) A conflict in which people vie for limited resources but only one party is successful. D) A conflict in which people believe that their interests stand at odds with the other party's interests, when, in fact, they don't.
d
Which of the following comes closest to implying a win-win situation? A) reaching a middle ground between negotiators' positions B) dividing the bargaining zone among the negotiators C) satisfaction on the part of both negotiating parties D) leveraging all creative opportunities and resources
d
Which of the following is the best example of an integrative negotiation? A) MLK and BlueSun Corp. reach a compromise in an attempt to reach a midpoint between their opposing desires. B) BlueSun Corp. opens the negotiation by requesting something that is immediately granted. C) Both MLK and BlueSun Corp. are satisfied with the outcome of the negotiation. D) MLK and BlueSun Corp. utilize all available resources to bring about the desired changes.
d
Which of the following is true for a presettlement settlement? A) They are not binding on the negotiating parties. B) They are permanent and cannot be changed. C) They resolve all outstanding issues between the parties. D) They are intended to be replaced at a later date.
d
Which of the following is true for a purely fixed-sum negotiation? A) An equal spilt between both parties is not possible. B) Both parties' outcomes can be improved simultaneously. C) The settlement cannot lie on the Pareto-optimal frontier. D) One party's gain is the other party's loss.
d
Which of the following occurs during the postsettlement settlement strategy? A) Negotiators explore other options while maintaining their BATNA constant. B) Negotiators stop exploring other options and accept the settlement as a permanent fixture. C) Negotiators decide to reject the previously decided-upon settlement and cease negotiation. D) Negotiators explore other options with the goal of finding another that both prefer more than the current one.
d
Which of the following statements is true regarding a bargaining zone? A) The negative bargaining zone indicates that there is no positive overlap between the parties' target points. B) The bargaining zone is the range between the negotiators' target points. C) The final settlement of a negotiation will fall somewhere below the seller's reservation point and above the buyer's target point. D) In a positive bargaining zone, negotiators' reservation points overlap.
d
Which of the following statements is true regarding a first offer? A) Your first offer should specify a range. B) The first offer should specify the bargaining zone. C) Your first offer should be your final offer. D) The first offer generally acts as an anchor point.
d
________ refers to agreeing on issues before being asked by the other party. A) Fixed-pie perception B) Logrolling C) Unbundling D) Premature concession
d
A win-win negotiation is only achieved when parties make equal concessions or split the difference.
f
Equity is often used to allocate benefits, but equality is more commonly used to allocate burdens.
f
For contingency contracts to be effective, they should create a conflict of interest.
f
It is appropriate for negotiators to reveal their true reservation price if they trust and like the other party or desire a long-term relationship.
f
It is similarities in preferences, beliefs, and capacities that may be profitably traded off to create joint gain.
f
Negotiators should always use premature concessions to gain the other party's trust.
f
Negotiators who make larger and more frequent concessions maximize their slice of the pie, compared to those who make fewer and smaller concessions.
f
Since a BATNA is based on subjective factors, it is usually not verifiable.
f
The negative bargaining zone indicates that there is no positive overlap between the parties' target points.
f
The strategy of trading off so as to capitalize on different strengths of preference is known as unbundling.
f
During a negotiation, you should only walk away from the bargaining table if your BATNA is more attractive than the counterparty's offer.
t
False conflict occurs when people believe that their interests are incompatible with the other party's interests when, in fact, they are not.
t
In a positive bargaining zone, the most the buyer is willing to pay is greater than the least the seller will accept.
t
It is to a negotiator's advantage to set a high, somewhat difficult aspiration point early in the negotiation.
t
Negotiating each issue separately does not allow negotiators to make trade-offs between issues.
t
Negotiators who make multiple equivalent offers enjoy more profitable negotiated outcomes.
t
The best possible economic outcome for a negotiator is the one that just meets the counterparty's reservation point.
t
The illusion of transparency occurs when negotiators believe they are revealing more than they actually are.
t
The union of both parties' issues forms the issue mix of the negotiation.
t
Your first offer should not be a range.
t
