The Negotiator Magazine

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Negotiations go through distinct stages. During the Preparation Stage, representatives must learn as much about their own situations as possible – and as much about the opposing side’s circumstances as they can. When they have gathered the relevant information, they must ask themselves three critical questions. First, What happens to their own side if they fail to achieve any agreement with the other side? The answer to this question defines their bottom line. They must not forget to look across the table and ask themselves what they think is likely to happen to the other side if that party fails to reach an agreement with them. If they don’t ask the second part of this first question, they will usually concede too much power to their opponent. If their nonsettlement options are preferable to those possessed by the other side, they have bargaining power; if the other side’s nonsettlement alternatives are preferable to this side’s options, the other side possesses greater bargaining power.

The second question concerns the point at which they would like to conclude their interaction – i.e., their aspiration level. Studies show that individuals with higher expectations do better than persons with modest objectives. It thus behooves people to establish elevated – but realistic – goals they can use to guide them when they deal directly with the opposing side. The third question they must ask concerns their opening offer. Less experienced negotiators often like to begin with modest opening offers hoping to induce their opponents to respond in kind. This is a lovely concept, but it is empirically false. People who begin with offers that favor the other party have the opposite impact because of “anchoring.” The recipients of such generous offers think they will be able to do better than they initially expected, and they raise both their aspiration levels and their own opening offers. They want to be able to exploit the naivety of their opponents. On the other hand, when persons articulate less generous opening offers, they undermine the confidence of the persons on the other side, and those people lower their aspiration levels. Negotiators should thus begin with higher demands or lower offers – but they must start with positions they can rationally defend. If their positions are untenable, they lose credibility and undermine the bargaining process.

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May 2006