Exam 1 Negotiation Questions

The best way to respond to someone who uses the hardball tactic of highball/lowball is to counter with your own your own extreme first offer.

False

As a general rule, it is difficult for a negotiator to change her or his dominant negotiation/conflict handling style.

True

Company B (the Buyer) is interested in purchasing Company S (the Seller). Although Company B would like to buy Company S for $20 million, it considers Company S to be worth $30 million and would be willing to pay up to this amount (because the only alternative company available for purchase would cost $40 million). Company S would like to sell the firm to Company B for $40 million, but would be willing to sell the firm for as low as $25 million rather than keep it. Negotiators from the two companies meet to discuss the possibility of a deal. Company S begins the negotiation by asking for $42 million for the company. Company B responds with an offer of $17 million. What is Company S's aspiration level (AL)?

$40 million

A "negotiation" is best described as:

-a process that helps two or more people work together to achieve goals and solve problems. -a problem-solving activity that requires the active participation of both negotiators for a deal to be reached.

People frequently say they "hate to negotiate" because they:

-don't see negotiation situations develop until it is too late to do any planning. -fail to understand what is required to plan for an effective negotiation. -do not understand that different negotiation situations may require different strategies. -assume all negotiations are competitive and "win-lose" in nature.

Consider the following scenario: Company B (the Buyer) is interested in purchasing Company S (the Seller). Although Company B would like to buy Company S for $20 million, it considers Company S to be worth $30 million and would be willing to pay up to this amount (because the only alternative company available for purchase would cost $40 million). Company S would like to sell the firm to Company B for $40 million, but would be willing to sell the firm for as low as $25 million rather than keep it. Negotiators from the two companies meet to discuss the possibility of a deal. Company S begins the negotiation by asking for $42 million for the company. Company B responds with an offer of $17 million. What is the reservation price (RP) for Company B?

30 million

Why is it important to have a good understanding of your personal negotiation/conflict handling style (i.e., competing, collaborating, compromising, avoiding or accommodating) when preparing for a negotiation?

A negotiator who understands his or her dominant style will be better able to prepare for a negotiation. The specific strategy for a negotiation must fit the specific negotiation situation, and strategy often times must change once the negotiation begins. A person who tends towards an accommodating style, for example, may have to consider a more aggressive approach (or use the services of an agent) for a negotiation that will require a competitive strategy.

How would a negotiator's past relationship and prior interactions with the other negotiator affect his or her choice of a particular negotiation strategy?

A negotiator whose past experience with the other negotiator involved a competitive negotiation will assume the next negotiation with that person will likewise be competitive. He or she will thus prepare for a competitive negotiation, including the possible use of contentious or hardball tactics.

Negotiators are advised to set their reservation price (RP) based on their Best Alternative to a Negotiated Agreement (BATNA). Give one reason why a negotiator might set his or her RP higher (better) than her BATNA. Then give one reason why he or she might set it lower (worse) than her BATNA

A negotiator would set his or her RP higher than his or her BATNA in order to gain something from the negotiation - otherwise why engage in the negotiation in the first place? One reason that a negotiator may set his or her RP lower than his or her BATNA is if the negotiator is less concerned about his or her personal outcome and more concerned about the outcome achieved (and relationship with) the other negotiator (an accommodation situation).

How can a negotiator determine the settlement zone, or zone of potential agreement (ZOPA) in his or her negotiation?

By paying close attention to the pattern of concessions made by the other negotiator. That is why the "negotiations dance" (the information-trading and deal-making stages of the negotiation) is so important to the negotiated outcome.

What assumptions might people make when completing the 9-trial Decision Task? a) Some people will assume that the goal of the task is for them to choose the option that maximizes their outcome. b) Some people will assume that the goal of the task is for them to find the option that maximizes the outcome for the other person. c) Some people will assume that the goal of the task is to find the maximum outcome that provides both parties with an equal amount. d) a and b e) a, b and c

E) a, b, c

A key finding of the Rackham study about the traits of effective negotiators is that effective negotiators use distributive strategies and hardball tactics far more often than "average" negotiators.

False

As a general rule, and according to the nine-year study of "skilled" negotiators conducted by Rackham, "skilled" negotiators prefer using competitive negotiations strategies compared to the cooperative negotiations strategies favored by less skilled negotiators.

False, they prefer to use cooperative tactics

Identify and discuss the five traits the authors associate with successful negotiators

Genuine, ethical, active listener, flexible, curious

An important part of planning for a negotiation involves considering the negotiation style that best fits the specific negotiation situation.

True

What is the "fixed pie assumption"? How might the "fixed pie assumption" affect a negotiator's strategy or tactics?

The fixed pie assumption is the belief that every negotiation is a win-lose transaction. A negotiator with the fixed pie assumption believes that what he or she wants is in direct conflict with what the other negotiator wants, the negotiation involves fixed resources (the resource "pie" is only so big) and the only way he or she can claim value ("win") is to take as many of those resources (the "pie") as possible away from the other negotiator.

Imagine that you and your roommates have just moved out of an apartment and you need to talk to your landlord about getting your security deposit back. Yesterday your security deposit check came in the mail, but you notice that the landlord withheld $1,500 for damages and cleaning the carpet. You know that you did not leave everything exactly perfect but you did spend several hours cleaning the apartment when you moved out. You decide to contact your landlord and try to get the rest of your security deposit back. If you can't convince the landlord to give you the rest of the security deposit back, you will have to find a lawyer to help you file a lawsuit against the landlord in small claims court What characteristics suggest that this will be a distributive bargain?

The focus on a single issue, the possible use of negative leverage (the threat of filing a small claims lawsuit), and the apparent lack of a strong relationship with the landlord.

Although most negotiators have a dominate negotiation/conflict handling style, effective negotiators understand that they may have to use a different style depending on the specific negotiation situation.

True

Consider the following scenario: Company B (the Buyer) is interested in purchasing Company S (the Seller). Although Company B would like to buy Company S for $20 million, it considers Company S to be worth $30 million and would be willing to pay up to this amount (because the only alternative company available for purchase would cost $40 million). Company S would like to sell the firm to Company B for $40 million, but would be willing to sell the firm for as low as $25 million rather than keep it. Negotiators from the two companies meet to discuss the possibility of a deal. Company S begins the negotiation by asking for $42 million for the company. Company B responds with an offer of $17 million. What is the bargaining zone for this negotiation? Is it a positive or negative bargaining zone?

There is a positive bargaining zone between $25 and $30 million.

What factors should a negotiator consider when deciding whether or not to make the first offer in a negotiation?

When the negotiator has a good understanding of the market rate of the goods or services involved in the negotiation or when he or she has negotiated with the other negotiator in the past and has a good working relationship with the other negotiator. If both parties are equally knowledgeable about the market value of the goods/services, it probably makes little difference who makes the first offer because neither negotiator will be overly influenced by it (the anchor and adjustment effect).

A competitive negotiations strategy is useful when: a) a negotiator needs to stand firm on an issue and maintaining a good relationship with the other negotiator is of little or no concern. b) the negotiation situation suggests the possibility of both parties doing well by working together. c) concern for the negotiator's own outcomes is low and there is an ongoing relationship with the other negotiator. d) a and b e) a, b and c

a) a negotiator needs to stand firm on an issue and maintaining a good relationship with the other negotiator is of little or no concern.

Forty-two Republican Senators in the United States Senate announced in December 2010 that they would block legislative action on every issue being proposed by Democratic Senators until Congress passed a law extending tax cuts previously agreed to during the time that George W. Bush was President. The Republicans' action in refusing to negotiate on any legislative issue until the Democrats agreed to extend the Bush tax cuts best reflects the hardball tactic of: a) Chicken. b) Nibbling. c) a sweetener. d) a flinch. e) bogey.

a) chicken

Which negotiation strategy would generally be the most appropriate to use in a distributive bargaining situation? a) Competitive b) Collaboration c) Accommodation d) Compromise e) Avoidance

a) competitive

After graduating from the university, you accepted a job with the ABC Company. You have been working for ABC for the past two years. Your supervisor, Wei, constantly praises your work and suggests that you are on track to be promoted to a management position. Although you like both Wei and ABC, you believe that your base salary is $2,000 lower than what you should be paid. When you ask Wei about the possibility of receiving a $2,000 pay raise, Wei replies, "I have always enjoyed our working relationship. I consider myself as a mentor for you. You know how hard the company is working right now to keep our existing clients. This is a bad time for you to ask for more money. I am offended by your request. If the economy improves, I will promise to talk to management about getting you a pay raise." Feeling guilty for asking for the additional $2,000, you thank Wei for talking to you. Based on these facts, Wei has most likely used the hardball tactic of _________________ in her meeting with you. a) Intimidation b) Bogey c) Nibble d) Chicken e) good cop/bad cop

a) intimidation

You have a used car spotted at the local car dealer. You look to spend between $7,500 and $10,000 for the used car. The sales manager believes that she can sell the used car you have spotted for somewhere between $9,000 and $11,000. Based on these facts, there is a ________________________ when it comes to the sale/purchase of this used car. a) positive bargaining zone b) negative bargaining zone c) neutral bargaining zone

a) positive bargaining zone

In a negotiation, the other party offers you minimal information about their financial statements but then asks you (in exchange for the information they gave you) to provide detailed information on how you calculate the retail price for the products you sell. In this situation, the other negotiator is using _______________________ to attempt to gain more information from you than what he offered in exchange. a) the norm of reciprocity b) Precedence c) a fairness norm d) the equality norm e) a consistency norm

a) the norm of reciprocity

When both parties to a negotiation have a good Best Alternative to a Negotiated Agreement (BATNA), what effect should this have on the settlement zone (or zone of possible agreement)? a) It should make the settlement zone larger. b) It should decrease the size of the settlement zone. c) BATNAs are not related to the settlement zone. d) None of the above are true

b) It should decrease the size of the settlement zone.

Which of the following is best described as a "distributive" bargaining situation? a) You are negotiating with your fiancé over the cost of your upcoming wedding. b) You are negotiating with your landlord at the end of your apartment lease for the return of the full amount of your security deposit. c) You are negotiating with your parents to pay for the cost of a summer school class. d) You are negotiating with your roommate over which movie to rent at the video store. e) None of the above

b) You are negotiating with your landlord at the end of your apartment lease for the return of the full amount of your security deposit.

Which of the following negotiation/conflict handling styles would be most appropriate in a situation in which a person must maximize his or her outcome and the relationship with the other person (and his or her outcome) is not important? a) Accommodation b) Competition c) Avoidance d) collaboration/problem-solving e) none of the above

b) competition

A person using the accommodating negotiation/conflict handling style: a) views the negotiation process in and of itself as a conflict to be avoided. b) may fail to achieve his or her own goals because of the emphasis accommodators place on maintaining a good relationship with the other person in a negotiation. c) sees a negotiation situation as a problem or challenge to be solved. d) values quality and fairness in attempting to find a middle ground solution to a conflict or negotiation situation. e) All of the above

b) may fail to achieve his or her own goals because of the emphasis accommodators place on maintaining a good relationship with the other person in a negotiation.

Which of the following statements is false? a) Generally, a negotiator should not change his or her reservation price (RP) after the start of a negotiation. b) negotiator's Best Alternative to a Negotiated Agreement (BATNA) can never be improved. c) Without an established BATNA, a negotiator may ultimately accept a suboptimal outcome. d) A negotiator may set his RP by considering objective information, such as a list price for a used car. e) None of the above

b) negotiator's Best Alternative to a Negotiated Agreement (BATNA) can never be improved

Imagine that you and your roommates have just moved out of an apartment and you need to talk to your landlord about getting your security deposit back. Yesterday your security deposit check came in the mail, but you notice that the landlord withheld $1,500 for damages and cleaning the carpet. You know that you did not leave everything exactly perfect but you did spend several hours cleaning the apartment when you moved out. You decide to contact your landlord and try to get the rest of your security deposit back. If you can't convince the landlord to give you the rest of the security deposit back, you will have to find a lawyer to help you file a lawsuit against the landlord in small claims court. Identify two hardball tactics you might use in negotiating with your landlord. Will hardball tactics be effective in this negotiation? Why or why not?

ball/low ball offer and possibly good cop/bad cop with the help of one of your roommates. Hardball tactics may be effective as both parties likely view this as a distributive bargaining situation.

In order to be given a specific social orientation classification on the 9-trial Decision Task, a person must score at least ____ out of 9 for a particular social orientation measure. a) Four b) Five c) Six d) Seven e) Eight

c) six

When is it in a negotiator's best interest to make the first offer? a) When the other negotiator is very knowledgeable about the market price of the goods you are buying and selling. b) When you are uncertain about the appropriate market price. c) When you believe the other negotiator is uncertain about the market value. d) When you are the buyer in the negotiation. e) It is never in a negotiator's interest to make the first offer in a negotiation.

c) when you believe the other negotiator is uncertain about the market value

Why is a nibble generally an effective negotiations tactic? a) Since a nibble is made after the negotiators appear to have reached an agreement, an inexperienced negotiator may worry that the agreement will fall apart if he or she does not agree to the additional request. b) Negotiators frequently rationalize agreeing to the nibble by comparing the relatively low cost of agreeing to the nibbler with the total value of the negotiated agreement. c) a and b

c) a and b

The 9-trial Decision Task provides a score on three social orientation measures, which include: a) Collectivism. b) Self-determination. c) Individualism. d) Problem-solving. e) avoidance.

c) individualism

A negotiator's ______________ may also represent his/her _______________ in a negotiation. a) reservation price (RP); aspiration level (AL) b) aspiration level (AL); bottom line c) reservation price (RP); bottom line d) aspiration level (AL); Best Alternative to a Negotiated Agreement (BATNA) e) a, c and d

c) reservation price (RP); bottom line

Which two reference points of the buyer and seller will determine their zone of potential agreement (ZOPA)? a) The aspiration levels (ALs) of the buyer and the seller. b) The reservation price (RP) of the buyer and the aspiration level (AL) of the seller. c) The Best Alternative to a Negotiated Agreement (BATNA) of the buyer and the seller. d) The reservation price (RP) of the buyer and the seller. e) The opening offers of the buyer and the seller

d) The reservation price (RP) of the buyer and the seller.

Rackham conducted a nine-year study of 48 professional labor and contract negotiators. Skilled negotiators, according to Rackham, generally: a) avoid defend/attack spirals with the other negotiator. b) spend more time than average negotiators looking for common ground or shared interests with the other negotiator. c) have more formal education - advanced degrees in business or law - than average negotiators. d) a and b e) a, b and c

d) a and b

Roger Dawson's "Power Negotiation/Sales Strategies" include: a) the use of the flinch by a buyer in a sales negotiation. b) telling the other negotiator that she will "have to do better than that" (something Dawson refers to as a "vice") after receiving the negotiator's first offer on price. c) making equal-sized concessions throughout the negotiation. d) a and b e) a, b and c

d) a and b

Option A - you get 500, other gets 100 Option B - you get 500, other gets 500 Option C - you get 550, other gets 250 What can we surmise about Jane's social values? She chose A A)She is sensitive to relative differences between self and others. B)She is willing to take less for herself in order to reduce what the other person receives. c) She is a competitor. d) All of the above e) Only a and c are true

d) all of the above

The Rackham study compared the information gathering behavior of skilled versus average negotiators. Which of the following is true of Rackham's findings? a) Skilled negotiators ask more questions than average negotiators. b) Skilled negotiators do more testing of their understanding of what the other negotiator said compared to average negotiators. c) Skilled negotiators spend more time summarizing issues and agreements during the negotiation than average negotiators. d) All of the above are true e) Only a and b are true

d) all of the above are true

Which of the following statements is true? a) Compromise and collaboration negotiation/conflict handling styles are effectively the same since both aim at achieving "win-win" outcomes. b) Collaboration is generally best used when there are multiple issues to be negotiated and the situation is not zero-sum. c) Very few negotiation situations would support the use of an avoiding negotiation/conflict handling style. d) b and c e) a, b and c

d) b and c

Which of the following statements is true? a) Being "genuine" in negotiations means that a negotiator understands and works with his/her general tendencies when analyzing a negotiation situation and preparing a negotiation strategy. b) Inexperienced negotiators frequently try to imitate the style of other more successful negotiators. c) Effective negotiators understand that even the best-planned negotiation strategy may have to change once a negotiation gets started. d) a and b e) a, b and c

e) a, b, c

Hardball tactics: a) generally signal that the negotiation will be distributive. b) may be effective to use against a poorly prepared negotiator. c) are designed to cause a negotiator to question her Best Alternative to a Negotiated Agreement (BATNA) and bargaining goals. d) a and b e) a, b and c

e) a,b,c

People who tend towards the use of a competitive negotiation/conflict handling style generally: a) excel at "win-lose" negotiations where both negotiators are attempting to maximize their outcome at the expense of the other side. b) use a variety of contentious or "hardball" negotiation tactics to achieve their goals. c) view most negotiation situations as zero-sum games. d) a and b e) a, b and c

e) a,b,c

Two years ago, you negotiated with a sales representative from New York City over the purchase of new furniture for your apartment. This negotiation was very competitive, as the sales representative spoke quickly, continually asked you how much money you were willing to spend on the furniture and repeatedly told you that if you did not buy the furniture at the listed price several other customers would be happy to do so. You have a salary negotiation scheduled for tomorrow with a human resources representative with a company that you would like to work for. In talking to the human resources representative, you discover that she is from New York City. Assuming that negotiations with people from New York City are always competitive, you prepare a competitive approach to your salary negotiation. This situation best reflects the concept of a/an: a) self-fulfilling prophecy. b) stereotype. c) assumption. d) a and b e) a, b and c

e) a,b,c

Distributive bargaining situations are based on several underlying assumptions and/or characteristics. These include: a) an assumption that there is a fixed amount of resources to be distributed during the negotiations. b) the belief that the interests of the negotiators are diametrically opposed. c) the notion that distributive bargaining is more likely to occur when the negotiation involves a single issue, like price. d) an assumption that that the relationship between the two negotiators is not a strong one or that maintaining a future relationship is not important to either negotiator. e) All of the above

e) all of the above

Which of the following statements is true? a) In distributive bargaining, it is generally not advisable to share your Best Alternative to a Negotiated Agreement (BATNA) with the other negotiator. b) Often times negotiators may fail to reach an agreement, even when a positive settlement zone exists, because of a lack of trust between the negotiators. c) The parties' negotiation dance will help to determine if an agreement is possible. d) Reference points, like an Aspiration Level (AL), reservation price (RP) and BATNA, will help a negotiator know when to walk away from a deal and when to accept a proposed deal. e) All of the above

e) all of the above

Why are many people reluctant to negotiate over salary during an employment negotiation? a) They worry about being seen by the employer as "greedy" by asking for more than the offered salary amount. b) They are concerned about the appearance of being aggressive or "ungrateful." c) They worry about having the job offer rescinded and given to another candidate. d) They have not properly determined their Best Alternative to a Negotiated Agreement (BATNA) or taken steps to improve their BATNA. e) All of the above

e) all of the above

Assume that you are trying to sell a textbook to your roommate. You have determined the market value of your book to be $45 (based on a "buy-back" price you received from the University Book Store) but have a goal of selling the book for $75. Your roommate offers to buy your textbook for $50. Based on these facts, which of Roger Dawson's "Power Negotiation/Sales Strategies" would be appropriate for you to use in countering your roommate's first offer? a) Accept your roommate's first offer since you have such a weak alternative to buying the book from your roommate. b) "Flinch" at your roommate's first offer. c) Offer to split the difference between $45 and $50. d) Play the part of a "reluctant seller." e) b and d

e) b and d

Which of the following statements about people classified as "cooperative" is true a) Cooperative people actually tend to make fewer concessions in negotiations compared to competitive people. b) Cooperative people tend to be more effective than individualistic socially oriented people in working with other people to expand resources available to distribute during a negotiation. c) Cooperative people are better able than competitive people to use and implement integrative ("win-win") negotiation strategies. d) Cooperative people tend to make more proposals during a negotiation than competitive people. e) b, c and d

e) b,c,d

Why is a collaborative negotiation strategy often times the hardest to implement? a) It requires a number of third-party individuals to act as agents or facilitators. b) It represents an ideal situation that does not really exist. c) It requires that a negotiator identify his or her interests as well as the interests of the other negotiator. d) It requires a significant amount of trust between the two negotiators so that they can share different concerns and interests about the issues being negotiated. e) c and d

e) c and d

Which of the following statements about salary/employment negotiations is false? a) It is important for a job candidate in a salary negotiation to identify his/her Best Alternative to a Negotiated Agreement (BATNA). b) A job candidate should generally let the employer first raise the issue of starting salary. c) It is important for a job candidate to understand the market value of someone with her/his experience and qualifications. d) A job candidate should not immediately accept or reject the employer's first salary offer. e) None of the above

e) none of the above

Studies suggest that cooperative negotiators cannot be successful in price-only business transactions nor can competitive negotiators be effective in situations that require relationship-building skills.

false

Imagine that you and your roommates have just moved out of an apartment and you need to talk to your landlord about getting your security deposit back. Yesterday your security deposit check came in the mail, but you notice that the landlord withheld $1,500 for damages and cleaning the carpet. You know that you did not leave everything exactly perfect but you did spend several hours cleaning the apartment when you moved out. You decide to contact your landlord and try to get the rest of your security deposit back. If you can't convince the landlord to give you the rest of the security deposit back, you will have to find a lawyer to help you file a lawsuit against the landlord in small claims court. What is your Best Alternative to a Negotiated Agreement (BATNA)?

file a small claims lawsuit to recover as much of the security deposit as possible

Consider the following scenario: Company B (the Buyer) is interested in purchasing Company S (the Seller). Although Company B would like to buy Company S for $20 million, it considers Company S to be worth $30 million and would be willing to pay up to this amount (because the only alternative company available for purchase would cost $40 million). Company S would like to sell the firm to Company B for $40 million, but would be willing to sell the firm for as low as $25 million rather than keep it. Negotiators from the two companies meet to discuss the possibility of a deal. Company S begins the negotiation by asking for $42 million for the company. Company B responds with an offer of $17 million. What is Company B's Best Alternative to a Negotiated Agreement (BATNA)?

purchase the alternative company for $40 million