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Chapter 14 - Bargaining and negotiations. Chapter 14 examines the important human interactions called bargaining and negotiation in a business setting. Bargaining occurs between individuals, groups, organizations, and countries. In this chapter we considered bargaining between two parties, each possessing resources the other side desires. | 1 Chapter 14: Bargaining and Negotiations Purchasing and Supply Chain Management, 3rd edition, Copyright 2013, W. C. Benton Jr., All rights reserved Content Bargaining Distributive bargaining Integrative bargaining Distributive bargaining experiment Formal negotiation 2 Bargaining Explicit bargaining An interaction where parties with certain disagreements confer and exchange ideas about a possible solution until a compromise is reached or the bargaining is terminated 3 Negotiation The preliminary discussion to bargaining The terms bargaining and negotiation have been used interchangeably. 4 Two-party Bargaining Bilateral monopoly system or two-party bargaining Bargaining that occurs between two parties who possess resources the other desires The 2 types of two-party bargaining: Distributive bargaining Psychology Integrative bargaining Economics 5 Distributive Bargaining Definition: Bargaining where the total gains is “distributed” between the two parties involved, and each party . | 1 Chapter 14: Bargaining and Negotiations Purchasing and Supply Chain Management, 3rd edition, Copyright 2013, W. C. Benton Jr., All rights reserved Content Bargaining Distributive bargaining Integrative bargaining Distributive bargaining experiment Formal negotiation 2 Bargaining Explicit bargaining An interaction where parties with certain disagreements confer and exchange ideas about a possible solution until a compromise is reached or the bargaining is terminated 3 Negotiation The preliminary discussion to bargaining The terms bargaining and negotiation have been used interchangeably. 4 Two-party Bargaining Bilateral monopoly system or two-party bargaining Bargaining that occurs between two parties who possess resources the other desires The 2 types of two-party bargaining: Distributive bargaining Psychology Integrative bargaining Economics 5 Distributive Bargaining Definition: Bargaining where the total gains is “distributed” between the two parties involved, and each party usually wants as much as it can get Without some degree of cooperation either party can block the bargaining Can use game theory Varying sum bargaining Zero-sum bargaining 6 Payoff System Factors related to the payoff system: The amount that has to be exceeded if the bargainer is to realize a profit The cost of time spent in bargaining The cost of failure to reach agreement Added benefits achieved by obtaining a specific threshold value Qualitative or quantitative variations in the general level of payoff values Whether payoffs are based solely on one’s own profit schedule or are based, in whole or in part, on the degree to which one’s profits exceed those of others Whether conflict is constant-sum or varying-sum Penalties the bargaining opponent (or perhaps a third party) is likely to impose for failure to yield 7 Payoff System Factors Breakeven Point The amount that must be exceeded in the bargaining interaction in order to obtain a profit Bargaining is often an attempt to convince the .
