Distributive
Bargaining
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Distributive Bargaining
Defined:
“A negotiation method in which two
parties strive to divide a fixed pool of
resources, each trying to maximize
its share of the distribution”
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Distributive Bargaining
Also commonly known
as:
A “fixed-sum”
process
A “zero-sum” process
“Win-lose” bargaining
“Hard bargaining”
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Why? 4
Because many situations are
perceived as single issue – money –
and each dollar “gained” by one
party is “lost” by the other party
Easily identified example: the
negotiated sale of a big-ticket item
(house, car) between a seller and a
buyer
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Three Components of 5a
Distributive Bargaining
Model
1. The parties view each other as
adversaries
2. The objective of both parties is to
maximize their self-interest, or share of
“the pie”
3. The parties are only concerned about the
content of the current negotiation and act as
if
they expect no future relationship
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Five Negotiation Skills
Skill 3.1: Recognize a distributive
bargaining situation’s three key
components
Skill 3.2: Determine a reservation price
Skill 3.3: Use bracketing of the other
party’s offer
Skill 3.4: Recognize and use social
norms to evaluate offers
Skill 3.5: Learn the framing of offers to
influence how they are perceived
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Chapter Case: Buying a Work7 of
Art
Successful California artist Chris
Comte has a painting titled “Sunday”
on display in her studio
A vacationing couple from Texas
admire the painting one day, and
return the next to offer Chris $7,500.
The listed price is $12,500 and Chris
tells them it is one of her best works
Why is this a distributive bargaining
situation?
Classic Distributive83-
Bargaining Model
0_____s________x________b_______$$
s = seller’s reservation price (min. price)
b = buyer’s reservation price (max. price)
x = negotiated price or final agreement
ZOPA = zone of possible agreement = s-b
(bargaining range or settlement range)
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“The Negotiation Dance”
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Inexperienced negotiators often use the
classic distributive bargaining model
They start with opening offers and then
“dance around” with counteroffers until
one near “x” is agreed upon
Why is this often NOT a good strategy?
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The Importance of
Information (cont.)
Skilled negotiators utilize information to
support their offers or diffuse other
offers
Three types of information:
Relational: Focus on relationship between
the parties
Example: “How can you trust this is your best
price?”
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The Importance of 11
Information
Substantive: Use of facts, reason, and
logic
Example: “Our price is based on the
bank’s approval loan limit”
Procedural: Discuss the process
Example: “We will engage in
discussions after we receive certain
information”
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Opening Offers 12
The most critical step in negotiations
Yet … successful negotiators are split
on strategy:
Many prefer to make the opening offer
while others prefer to receive the
opening offer!
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Opening Offers (cont.)
Anchoring = the
first number on the
table may “anchor”
the entire
negotiation
Why? People often
fixate on it
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Opening Offers (cont.)
Three types of opening offers which
can anchor the negotiations
Facts: “The average price paid in the
past year is $350,000”
Extreme: “This is the most valuable lot
and home in the entire neighborhood!”
Precedent: “My last supervisor always
gave me the highest rating”
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Inexperienced 15
Negotiators
May Easily Let the Opening Offer
Anchor the Deal
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Bracketing 16
Defined: The logical process of
moving toward a middle point
between the opening offers
Example: Seller’s listed price = $15,000;
buyer desires to pay $13,000, thus
opens with $11,000
Thus, a negotiator may “bracket” the
other party’s opening offer by setting
their own opening offer the same
distance away from the desired value
“Traps to Avoid” 3-
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Responses to an
“Extreme” Opening Offer
Recognize it: as a “tactic,” not an
insult
Label it: “Outrageous” “Ridiculous”
Follow up: with your own opening
offer anchored by facts, precedent,
and other information
Social Norms 3-
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After opening offers, how can parties distribute
the possible gain available to both sides?
Negotiators often frame their offers by
utilizing social norms:
Relational: desire to maintain a positive relationship
Fairness: four variations
Equality: “50-50” or “split the difference”
Equity: proportional effort, inputs
Need: proportional needs
Status quo: keep current situation
Reciprocity: respond to the change from a previous
offer with an equal change in your next counter
Good faith: meet and discuss options; favor offers;
use information
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Does a Social Norm Provide
the “Fairest” Settlement?
“The Consistency Principle”: people
need consistency and fairness in the
negotiation process
The fairness norms may be the most
commonly utilized
Which settlement values between
$7,500 and $12,500 is “fairest”?
“best”? “right”?
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Counteroffers 22
Framing: a key negotiation skill
Defined: The wording or context of an
offer
Why framing is a key skill
“While facts and numbers are important,
people attach significant meaning to
words, which affects their views of a
proposal”
--Theodore Kheel, The Keys to Conflict
Resolution
Tactics for Success: 3-23
“Wait to Counter”
When receiving an offer wait a respectful
period before responding
Why?
A quick response implies you did not seriously
consider the offer
The other party will feel better about the process
Gives you time to develop a positive response:
“We considered your offer and appreciate the
movement on your part. We ask that you seriously
consider our counteroffer…”
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Four Types of Frames
(applied to the Chapter Case)
Reframing: “This work is a solid investment –
the only other Ireland piece by this artist just
sold at auction for $20,000”
Focus framing: “This is the only painting of a
lake the artist has done, and he’ll probably
never get back to Ireland to paint another”
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Four Types of Frames
(applied to the Chapter Case)
Contrast framing: “If you pay for it over
24 months, the cost per month is less
than the price of four tickets to a first-run
play, but you will enjoy the painting for
many years”
Negative framing: “You can wait to
decide – but another couple looked at it
earlier today and said they would be
back”
Reframing Offer 3-
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William Ury, Getting Past No, suggests
that negotiators never say no or reject an
offer instead they reframe by using
questions:
Ask why: “Why did you select that exact
number?”
Ask why not: “Why not ask for an estimate
from a professional appraiser?”
Ask what if: “What if we agree to your price,
but you paid for delivery and warranty?”
Ask for advice: “How would you suggest I
present this offer to my boss when she has
rejected that price?”
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Reframing Personal 28
Attacks
Personal attacks have become a common
tactic –don’t let emotions take over strategy
How?
Prepare: Expect personal attacks, control
your emotions
Recognize: The other party needs to “blow
off steam”
Reframe: Ignore the attack on you,
reframe it on the problem
Silence: Communicates your displeasure
and can be a powerful tool
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Final Negotiated Price
Shaking hands and exchanging a
product for money ends many
negotiations
Contingency contracts should be
used if future event may alter the
agreement or keep it from being
signed
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Negotiated Settlement
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Chapter Case “Buying a Work of Art”
Opening offers: Buyers = $7,500
Seller =$12,500
Reservation prices: Buyers = $11,000
Seller = $8,000
(ZOPA) = $8,000 - $11,000
Seller’s 1st counteroffer = $11,000 (framed by
citing the number of hours invested = need
norm; similar to three others sold = equity
norm)
st
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Negotiated Settlement
Seller’s 2nd counteroffer = $10,000
($1,000 concession)
Buyers accept
Negotiated price = X = $10,000
Seller’s gain = $2,500 over buyer’s
opening offer
Buyers’ gain = $2,500 less than
seller’s listed price
