CHAPTER 2

STRATEGY AND TACTICS

OF DISTRIBUTIVE
BARGAINING
Sub-topic
 Learning Objective

1. Grasp the basic structure of distributive

bargaining and some related strategies and
tactics.
2. Understand how to effectively manage
distributive bargaining process, focusing on
careful planning, strong execution, and constant
monitoring of the other party’s reactions.
3. Apply distributive bargaining skills properly to
value claiming stage of any negotiation, e.g.
integrative negotiation.
 2-3

The Distributive Bargaining

Situation
• Goals of one party are in fundamental,direct conflict to another party
• Resources are fixed and limited
• Maximizing one’s own share of resources is the goal
 2-4

The Distributive Bargaining

Situation
Preparation—set a
• Target point, aspiration point
• Walkaway, resistance point
• Asking price, initial offer
 2-5

The Distributive Bargaining

Situation

Party A - Seller

Walkaway Point Target Point Asking Price

Initial Offer Target Point Walkaway Point

Party B - Buyer
 2-6

The Role of Alternatives to a

Negotiated Agreement
• Alternatives give the negotiator power to walk away from the
negotiation
• If alternatives are attractive, negotiators can:
• Set their goals higher
• Make fewer concessions
• If there are no attractive alternatives:
• Negotiators have much less bargaining power
 2-7

The Distributive Bargaining

Situation

Party A - Seller

Walkaway Point Target Point Asking Price

Alternative

Alternative
Initial Offer Target Point Walkaway Point

Party B - Buyer
 2-8

Fundamental Strategies
• Push for settlement near opponent’s resistance point
• Get the other party to change their resistance point
• If settlement range is negative, either:
• Get the other side to change their resistance point
• Modify your own resistance point
• Convince the other party that the settlement is the best possible
 2-9

Keys to the Strategies

The keys to implementing any of the four strategies are:
• Discovering the other party’s resistance point
• Influencing the other party’s resistance point
 2-10

Tactical Tasks of Negotiators

• Assess outcome values and the costs of
termination for the other party
• Manage the other party’s impressions
• Modify the other party’s perceptions
• Manipulate the actual costs of delay or
termination
 2-11

Assess Outcome Values and the Costs of

Termination for the Other Party
• Indirectly
• Determine information opponent used to set:
• Target
• Resistance points
• Directly
• Opponent reveals the information
 2-12

Manage the Other Party’s Impressions

• Screen your behavior:

• Say and do as little as possible

• Direct action to alter impressions

• Present facts that enhance one’s position
 2-13

Modify the Other Party’s Perceptions

• Make outcomes appear less attractive
• Make the cost of obtaining goals appear higher
• Make demands and positions appear more or less attractive to the
other party –whichever suits your needs
 2-14

Manipulate the Actual Costs of

Delay or Termination
 Plan disruptive action
 Raise the costs of delay to the other party
 Form an alliance with outsiders
 Involve (or threaten to involve) other parties
who can influence the outcome in your favor
 Schedule manipulations
 One party is usually more vulnerable to
delaying than the other
 2-15

Positions Taken
During Negotiations
• Opening offer
• Where will you start?
• Opening stance
• What is your attitude?
• Competitive? Moderate?
• Initial concessions
• Should any be made? If so, how large?
 2-16

Positions Taken
During Negotiations
• The role of concessions
• Without them, there is either capitulation or deadlock
• Patterns of concession making
• The pattern contains valuable information
• Final offer (making a commitment)
• “This is all I can do”
 2-17

Commitments:
Tactical Considerations
• Establishing a commitment
• Three properties:
• Finality
• Specificity
• Consequences
• Preventing the other party from committing prematurely
• Their commitment reduces your flexibility
 2-18

Commitments:
Tactical Considerations
• Ways to abandon a committed position
• Plan a way out
• Let it die silently
• Restate the commitment in more general terms
• Minimize the damage to the relationship if the other backs off
 2-19

Closing the Deal

• Provide alternatives (2 or 3 packages)
• Assume the close
• Split the difference
• Exploding offers
• Deal sweeteners
 2-20

Dealing with Typical

Hardball Tactics
• Four main options:
• Ignore them
• Discuss them
• Respond in kind
• Co-opt the other party (befriend them)
 2-21

Typical Hardball Tactics

• Good Cop/Bad Cop
• Lowball/Highball
• Bogey (playing up an issue of little importance)
• The Nibble (asking for a number of small concessions to)
 2-22

Typical Hardball Tactics

• Chicken
• Intimidation
• Aggressive Behavior
• Snow Job (overwhelm the other party with information)
 Warming up Exercises

1. Any differences btwn Strategy and Tactic?

2. What does the term Distributive Bargaining
(DB) mean to you?
 An illustrative case

• Is this scenario familiar-sounding?

Customer
How much do you want for
this brass dish?
Oh come on, it’s dented. I’ll
give you $175.
Well, I could go to $200, but I You drive a hard bargain,
would never pay anything
like $500. Quote me a
realistic price.
$200.
Storekeeper
This is a beautiful antique,
isn’t it? I guess I could let it
go for $500.
Really! I might consider a
serious offer, but $175
certainly isn’t serious.
young lady. $425 cash, right
now.
It cost me a great deal more
than that. Make me a serious
offer.
1. Distributive Bargaining (DB): Distinctive
Features
 DB: A summary of Distinctive
Features
win-lose battles,
aimed at maximizing personal gain competitive environments that
encourage forcing, as disputants attempt to wrestle concessions
from each other toward an agreement most favorable to oneself.
Q: Other terms and labels to describe DB?
1.1 Basic Structure

Key steps
• Positions Taken during Negotiation.
• Commitment.
• Closing the Deal.
The entire process of making an opening offer
and then ending up with a mutually agreeable
settlement is known as the negotiation dance
(Raiffa 1982)
1.1 Basic Structure: Terms and Concepts
 Position: e.g. target/preferred/reservation points
 Offer: e.g. initial/opening/renewed/revised
 Concession
 Commitment
 Bargaining Zone (ZOPA)/Settlement Zone: Negotiated
Agreement
vs ZONA; Compromise
Alternatives to a Negotiated Agreement: BATNA
Settlement Point (p.37)
Bargaining Mix (p.37): e.g. Multiple Equal Offers (MEOs)
Pie= ZOPA?
 1.2 Fundamental Strategies
• “Tell me the bare • “Why don’t you tell us
minimum you would the very maximum that
accept from us, and I’ll you are willing to pay,
see if I can throw in and we’ll see if we can
something extra.” shave off a bit”
1.2 Fundamental Strategies: Bottom line

The above humorous story illustrates the essence

of negotiation:
How do people make sure they reach
agreement if the bargaining zone is positive but
claim as much of the pie as possible?
Q: Any rules of thumb?
NEVER reveal your reservation point
 1.2 Fundamental Strategies: the condo example

e.g. The buyer’s 4 strategies available:

(1) To push for a settlement close to the seller’s
resistance point.
(2) To convince the seller to change her
resistance point.
(3) If a negative settlement range exists, to
convince the seller to reduce her resistance point.
(4) To convince the seller to believe that this
settlement is the best that is possible.
1.2 Fundamental Strategies: Basics!

1. Discovering TOS’s Resistance Point

2. Influencing the Other Party’s Resistance
Point(p.38)
)
 1.2 Fundamental Strategies: Discover…(how?)

• The more you can learn about the other party’s target, resistance
point, motives, feelings of confidence, and so on, the more able you
will be to strike a favorable agreement.
• To influence the other party’s perception, however, they must
establish some points effectively and convincingly.
1.2 Fundamental Strategies: Influence… (how?)

 Factors are important in attempting to influence the other

party’s resistance point:
(1) the value the other attaches to a particular
outcome;
(2) the cost the other attaches to delay or difficulty in
negotiations;
(3) the cost the other attaches to having the
negotiation aborted.
 A significant factor in shaping the other person’s
understanding of what is possible is the other’s
understanding of your own situation.
1.3 Tactical Tasks (p.40)

• Assess the other party’s target, resistance point,

and cost of terminating negotiations
• Manage the Other Party’s Impressions
• Modify the Other Party’s Perceptions
• Manipulate the Actual Cost of Delay or
Termination
2. Effective DB process management

• What do effective bargainers do?

 2. Positions Taken during Negotiation
(Positional bargaining)
2.1 Opening Offers
2.2 Opening Stance
2.3 Initial Concessions
2.4 Role of Concessions
2.5 Pattern of Concession Making
2.6 Final Offers
opening offer
 2.1 Opening Offers (pp.47-8)

• The fundamental question is whether the opening

offer should be exaggerated or modest.
• There are at least two reasons that an exaggerated
opening offer is advantageous.
• Two disadvantages of exaggerated opening offer
are: (1) it may be summarily rejected by the other
party; (2) it communicates an attitude of toughness
that may be harmful to long-term relationships .
2.2 Opening Stance (pp.48-9)

• Will you be competitive or moderate?

• It is important for negotiators to think carefully
about the messages that they wish to signal with
their opening stance and subsequent
concessions.
• To communicate effectively, a negotiator should
try to send a consistent messages through both
opening offer and stance.
Box 2.3 The power of the first move (p.50)
 2.3 Initial Concessions (p.49)

 First concession conveys a message,

frequently a symbolic one to the other party that
how you will proceed.
 Firmness may actually shorten negotiations,
there is also the very real possibility, however, it
will be reciprocated by the other.
 There are good reasons for adopting a flexible
position.
 2.4 Role of Concessions

Concessions are central to negotiation.

take-it-or-leave-it VS progression of concession
Reciprocity: “Since you have reduced your
demand on X, I am willing to concede on Y.”

Box 2.4 four guidelines on how to make

concessions (p.51)
2.5 Pattern of Concession Making (p.51)

• Figure 2.4 Pattern of Concession Making for

Two Negotiators (p. 52)
5
Size of Concessions (in dollars)

=George’s concessions
4 =Mario’s concessions

0 1 2 3 4 5
Concession Number
 让步的方式 ( 刘宏 , 2010 年第 134 页 )

让步方式 第一次 第二次 第三次 第四次

冒险式让步方式 0 0 0 6
均衡式让步方式 1.5 1.5 1.5 1.5
递增式让步方式 0.8 0.3 1.7 3.2
小幅递减式让步方式 2.2 1.7 1.3 0.8
有限式让步方式 2.6 2 1.2 0.2
快速式让步方式 4.9 1 0 0.1
反弹式让步方式 5 1 -1 1
一次性让步方式 6 0 0 0
2.6 Final Offers (p.53)

“This is all I can do.”

“This is as far as I can go”
VS
“I went to my boss and got a special deal just
for you.”
 2.7 Commitment (pp.53-4)

• Commitment is the taking of a bargaining position with some explicit

or implicit pledge regarding the future course of action.
• The purpose of commitment is to remove ambiguity about the actor’s
intended course of action.
• A commitment is often interpreted by the other party as a threat.
 2.7 Commitment
1. Tactical Considerations in Using Commitments
2. Establishing a Commitment
3. Preventing the Other Party from Committing
Prematurely
4. Finding Ways to Abandon a Committed
Position
2.7.1 Tactical Considerations in Using Commitments
(p.54)

• Commitments exchange the flexibility for

certainty of action, but they create difficulties if
one wants to move to a new position.
• When one makes commitments one should also
make contingency plans for a graceful exit
should it be needed.
2.7.2 Establishing a Commitment (pp.54-6)

 A commitment statement has three properties: a

high degree of finality, a high degree of specificity,
and a clear statement of consequences.
e.g. “We must have a 10% volume discount in the
next contract, or we will sign with an alternative
supplier next month.”
 Several ways to create a commitment:
public pronouncement
linking with an outside base
increase the prominence of demands
reinforce the threat or promise
2.7.3 Preventing the Other Party from Committing
Prematurely (pp.56-7)

Approaches:
• To deny his or her the necessary time.
• To ignore or downplay a threat by not
acknowledging the other party’s commitment,
or even by making a joke about it. (e.g. “You
don’t really mean that,” OR “I know you cannot
be serious about really going through with
that,” ….)
2.7.4 Finding Ways to Abandon a Committed Position
(pp.57-8)

• Four avenues for escaping commitment:

Play a way out
Let it die silently
Restate the commitment
Minimize the damage
 2.8 Closing the Deal (pp.58-9)

• Several tactics are available to negotiators for

closing a deal:
• Provide alternatives 提供备选方案
Assume the close 假装成交
Split the differences 妥协，折中，互相让步
Exploding the offers 逼签
Sweeteners ：成交刺激，成交诱饵（以优惠的
条件促使成交） “ I’ll give you X if you agree to the
deal.”
2.9 Hardball Tactics (pp.60-8) 高飞球

Such tactics are designed to pressure

negotiators to do things they would not
otherwise do, and their presence usually
disguises the user’s adherence to a decidedly
distributive bargaining approach.
• 1 Dealing with typical hardball tactics
(TBCed)
• 2 Typical hardball tactics (TBCed)
2.9.1 Dealing With Typical Hardball Tactics

• How best to respond ？

Ignore them (p.60) 不予理睬
Discuss them (p.60) 加以讨论
Respond in kind (p.61) 正面回应，以同样的方
式回敬对方
Co-opt the other party (p.61) 拉拢对手，化敌
为友（联合次要敌人打击首要敌人）
Lowball/Highball (pp.62-3) 滚地球 / 高飞球
Risk: the other party will think negotiating is a
waste of time and will stop negotiating.
The best way to respond: ask for a more
reasonable opening offer from the other
party, but not “anchored” by the other’s first
outrageous offer.
Good preparation is a critical defense
against this tactic.
Bogey (pp.63-4) 哄骗
Negotiators using the bogey tactic pretend that an
issue of little or no importance to them is quite
important.
This tactic is fundamentally deceptive, and it can
be a difficult tactic to enact. Bogeys occurs more
often by omission 该做而没有做 than commission
做错事 .
Once again, good preparation is a critical defense
against this tactic. Probing with questions about why
TOS wants a particular outcome. Be cautious about
sudden reversals in positions taken by TOS,
especially late in a negotiation.
 The Nibble (p. 64) 最后揩油，最后再咬一口
Negotiators using the nibble tactic ask for a
proportionally small concession on an item that
hasn’t been discussed previously in order to
close the deal.
 Risk: (TOS) potential to seek revenge in future
negotiations.
 Two ways to combat the nibble (Landon, 1997).
respond with the question “What else do you
what?”;
respond with your nibble on another
issue/item.
 A nibble case in a business context
• After a considerable amount of time has been spent in negotiation,
when an agreement is close, one party asks to include a clause that
hasn’t been discussed previously and that will cost TOS a
proportionally small amount. This amount is too small to lose the
deal over, but large enough to upset TOS. (p. 64)
• Chicken (pp.64-5) (see Box 2.6 Playing Chicken
in int’l relations, p.66)
Negotiators using this tactic combine a large bluff
with a threatened action to force the other party
to “chicken out” and give them what they want.
Weakness: It turns negotiation into a serious
game in which one or both parties find it difficult
to distinguish reality from postured negotiation
positions.
Chicken (pp.64-5) 胆小鬼
Possible options:
1 Preparation and a thorough understanding of
the situations of both parties help identify the
boundary line.
2 Use of external experts to verify information or
to help reframe the situation.
 Intimidation (p.65-7) 胁迫，威吓
Many tactics under the label of intimidation all
attempt to force TOS to agree by means of an
emotional poly, usually anger or fear. Another
form includes increasing the appearance of
legitimacy. Guilt can also be used as a form of
intimidation.
How to deflate the effectiveness of intimidation?
discuss the negotiation process with the other
party; Ignore TOS’ attempts to intimidate you.
use a team to negotiate with TOS.
 Aggressive Behavior (p.67) 激烈手段
Negotiators using this tactic is signaling a hard-
nosed intransigent position and trying to force TOS
to make many concessions to reach an agreement.
e.g. “You can do better than that”, “Let’s not waste
any time. What is the most that you will pay?”,
“What is your cost breakdown for each item?”
countermoves: halt the negotiations in order to
discuss the negotiation process itself. Have a team
to counter the tactic. Good preparation and
understanding needs and interests relative to each
party make the job easier.
 6.2 Typical Hardball Tactics
 Snow Job (pp.67-8) 用欺骗手段来说服别人，花言巧
语
It occurs when negotiators overwhelm TOS with so
much information that he or she has trouble
determining which facts are real or important, and
which are included merely as distractions.
to counter this tactic:
Not be afraid to ask questions.
Instead of negotiators, technical experts discuss
technical issues.
Listen carefully to spot out incorrect and
inconsistent information in a complete snow job
package so as to question the accuracy of the whole
presentation.
Strong preparation counts.
3. Distributive Bargaining Skills Applicable to Integrative
Negotiation (p.68)

• Many of the skills are also applicable to the latter

stages of integrative negotiation when negotiators
need to claim value, that is, to decide how to
divide their joint gains.
• Care needs to be taken, however, not to seriously
change the tone of those negotiations by adopting
an overtly aggressive stance at this stage.
4 Teacher’s note

Chinese Textbook Approach to IB Negotiation

Prevalence of Strategy and Tactics (DB)
1 My own observation
2. Zhao(2000)

Zhao, Jensen J., The Chinese Approach to

International Business Negotiation, The
Journal of Business Communication,37(3),
July 2000: 209-237.