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3. Distributive Negotiation.

Ing. Beatriz Cervantes

Bibliography: Own elaboration based on Dr. Daniel Meade’s EGADE Negotiation

The Dance of Negotiation Syllabus (2012); The Art and Science of Negotiation by Howard Raiffa;
and Lewicki; Barry; Saunders; Essentials of Negotiation 6th ed. (2016); McGraw-Hill.

S1,S2=Seller’s concessions.
B1,B2= Buyer’s concessions.

(Seller)
Seller wants to SR = $300 S2 = S1 = So = $700
sell at this
Seller’s $450 $500 Anchor
price or more
Resistance Point Seller’s asking price
(secret) or initial offer

(Buyer)
Bo = B1 = B2 = X* = BR= $550 Buyer wants to
$250 $350 $400 $425 Buyer’s pay this price
Buyer´s Final agreement Resistance Point or less
initial offer (Settlement point, (secret)
Deal)

ZOPA (Zone of Possible Agreement) = BR - SR = $550 - $300 = $250

“size of the pie”, unknown to both parties at the beginning,
outside the ZOPA an agreement is unlikely.

Target Point (aspiration): Point at which a negotiator would like to conclude negotiations, his optimal goal (secret).
Buyer’s surplus = BR – X* = $550 - $425 = $125.
Seller’s surplus = X* - SR = $425 – $300 = $125
Predictor = ( Bo + So ) / 2 = ($250 + $700) / 2 = $475. Ing. Beatriz Cervantes.

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Distributive Glossary
TERM Characteristics
Initial offer From the seller’s point of view:
(Starting It is not recommended to place the initial offer (anchor, starting point, asking
point, price) very high, that is, very far from the price that one aspires to reach
“Anchor”, (target point), as it could cause rejection by the counterpart who could break
asking price) off negotiations believing the seller to be unreasonable.

However, it is recommended to leave space among the initial offer and the
target point, in order to create some room for making concessions (people
enter negotiations expecting concessions).

From the buyer’s point of view, this works the same (viceversa) regarding
her/his initial offer.

For each of the issues or agenda items of the negotiation, both parties to a
negotiation should establish their starting, target and resistance points
before beginning negotiation.

-Target point: secret, inferred through concessions.

-Resistance point: secret, might never be known not even after the end of
the negotiation.
Bibliography: Roy J. Lewicki, Bruce Barry, David M. Saunders; Essentials of Negotiation 6th edition (2016); McGraw-Hill. Ing. Beatriz Cervantes.

Distributive Glossary

TERM Characteristics
Target Point Point at which a negotiator would like to conclude negotiations, his
(aspiration) optimal goal; kept in secret, but as concessions are made it is possible
to infer it (target point is usually in between the initial offer and the
resistance point).

Resistance It is the limit that the negotiator is not willing to exceed:

point the maximum price that he will pay as a buyer (BR), or
the minimum price at which he will sell as a seller (SR).

Bibliography: Roy J. Lewicki, Bruce Barry, David M. Saunders; Essentials of Negotiation 6th edition (2016); McGraw-Hill. Ing. Beatriz Cervantes.

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Distributive Glossary

TERM Characteristics
Negotiation It is the area delimited between the resistance points of the buyer and the
range seller.

(ZOPA: • If the maximum price that the buyer is willing to pay (BR) is higher than
Zone of the minimum price at which the seller is willing to sell (SR), then “there is a
possible ZOPA” or “there is a positive negotiation range”, therefore there is a very
high probability of reaching an agreement.
agreement)
• But if (BR) is less than (SR), then “there is no ZOPA” or “there is a negative
negotiation range”, therefore the probability of reaching an agreement is
zero or very unlikely.

Some stats:
3% of the agreements are not reached despite having ZOPA.

If there is a ZOPA, 99% of the agreements will remain within the ZOPA.

Bibliography: Own elaboration based on Dr. Daniel Meade’s EGADE Negotiation Syllabus (2012);
and Lewicki; Barry; Saunders; Essentials of Negotiation 6th ed. (2016); McGraw-Hill. Ing. Beatriz Cervantes.

Distributive Glossary
TERM Characteristics
Settlement It is the point or price at which the deal is closed, within the negotiation
point range (ZOPA).
(Final
agreement, Once both parties have made their initial offer, the best predictor of the
Deal) settlement point (Streaker predictor) is the sum of both initial values ​divided
by two, as long as it is within the ZOPA.

BATNA • It is the best alternative option that the negotiator has available with a
(Best third party in the event that he does not reach an agreement in the present
Alternative negotiation.
to a
Negotiated • BATNA gives the negotiator the power to withdraw from the negotiation if
Agreement) he considers that the agreement would not be attractive.

• It is necessary to identify the BATNA before going to negotiate.

Bibliography: Roy J. Lewicki, Bruce Barry, David M. Saunders; Essentials of Negotiation 6th edition (2016); McGraw-Hill. Ing. Beatriz Cervantes.

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Distributive Glossary
TERM Characteristics
Concessions Are successive steps that the seller and the buyer take away from their initial
offer and towards their resistance point, with each step they give value to the
counterpart.

• If one party observes that the counterpart does not make concessions and
uses the ”take it or leave it” approach, it may decide to abandon the
negotiation.

Hendon, Roy, and Ahmed provide the following 12 guidelines for making
concessions in negotiation:
1. Give yourself enough room to make concessions.
2. Try to get the other party to start revealing their needs and objectives first.
3. Be the first to concede on a minor issue but not the first to concede on a
major issue.
4. Make unimportant concessions and portray them as more valuable than
they are.
5. Make the other party work hard for every concession you make.
6. Use trade-offs to obtain something for every concession you make.

Bibliography: Roy J. Lewicki, Bruce Barry, David M. Saunders; Essentials of Negotiation 6th edition (2016); McGraw-Hill. Ing. Beatriz Cervantes.

Distributive Glossary
TERM Characteristics
Concessions Continues…
7. Generally, concede slowly and give a little with each concession.
8. Do not reveal your deadline (limits) to the other party.
9. Occasionally say “no” to the other negotiator.
10. Be careful trying to take back concessions even in “tentative” negotiations.
11. Keep a record of concessions made in the negotiation to try to identify a
pattern. Are they proportional?
12. Do not concede “too often, too soon, or too much.”
Bibliography: Donald W. Hendon, Matthew H. Roy, and Zafar U. Ahmed, “Negotiation concession patterns: A
multi-country, multiperiod study.” American Business Review (2003).

• It is important to let the other party notice with actions and words when the
concessions are about to end.

• To indicate to the counterpart that this is your final offer, it is recommended

that the negotiator make his final concession more substantial so that it gives
the impression that he is letting go of his remainder of the negotiation range
(substantial enough to be dramatic, but not enough to suspect that he still
kept a lot of value on his side).

Bibliography: Roy J. Lewicki, Bruce Barry, David M. Saunders; Essentials of Negotiation 6th edition (2016); McGraw-Hill. Ing. Beatriz Cervantes.

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Distributive Glossary
TERM Characteristics
Concessions Continues…

• The Nash equilibrium is said to be present when the concessions

made by both parties are equivalent in frequency and magnitude, so
they are more likely to end up in the middle “of the pie” and the
value is shared equally. This equilibrium is a message that the
parties send to each other to continue the relationship, it is an
invitation to move from a distributive to an integrative negotiation.

Bibliography: Roy J. Lewicki, Bruce Barry, David M. Saunders; Essentials of Negotiation 6th edition (2016); McGraw-Hill. Ing. Beatriz Cervantes.

Distributive Glossary

TERM Characteristics
Context
(Framework) They are the factors of the external environment that can influence the
course that the negotiation will take. It is the benchmark on which it was
negotiated.

• Overconfidence: Some of the parties feel that they have "the upper
hand" in the negotiation due to external factors favoring them.

• Underconfidence: When someone feels weak in the negotiation because

external factors are against him.

• Over and Underconfidence are dangerous because they can lead to no

ZOPA and therefore no agreement.

Bibliography: Roy J. Lewicki, Bruce Barry, David M. Saunders; Essentials of Negotiation 6th edition (2016); McGraw-Hill. Ing. Beatriz Cervantes.

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Bibliography

• Roy J. Lewicki, Bruce Barry, David M. Saunders; Essentials of Negotiation

6th edition (2016); McGraw-Hill.

.
• Dr. Daniel Meade’s ITESM EGADE Negotiation Syllabus (2012).

Ing. Beatriz Cervantes. 11

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