Negotiation and Batna

Topics: Negotiation, Decision theory, Best alternative to a negotiated agreement Pages: 12 (3578 words) Published: April 2, 2010
Copyright © 2007 Elsevier B.V. All rights reserved.
Decision Support
Negotiating wisely: Considerations based on MCDM/MAUT
Jingguo Wanga, [pic], [pic]and Stanley Ziontsb, [pic]
aDepartment of Information Systems and Operations Management, College of Business Administration, University of Texas at Arlington, Arlington TX 76019-0377, United States bDepartment of Management Science and Systems, School of Management, State University of New York at Buffalo, Buffalo, NY 14260-4000, United States

Received 16 January 2006; 
accepted 21 March 2007. 
Available online 18 April 2007.

Abstract
Negotiation, both an art and a science, is important in business and in personal life. To negotiate intelligently, we need a strategy to help identify when, for what, and how we should negotiate. We consider a one-to-many negotiation problem such as a house-purchase process in which there is one buyer and many sellers. The alternatives are evaluated using multiple criteria, but only one criterion (such as price) is to be settled by negotiation. We use the Best Alternative To a Negotiated Agreement (BATNA) as a dynamic measure of negotiating strength, and develop a systematic quantitative iterative approach to assist in the negotiation process. We explore using simulation the efficacy of negotiating for more than one alternative at the same time. The objective of our approach is to help a negotiator achieve a good, hopefully an optimal, result effectively. Keywords: Negotiation; Best Alternative To a Negotiated Agreement (BATNA); Filtering; Multi-criteria decision making (MCDM); Multi-attribute utility theory (MAUT) Article Outline

1. Introduction
2. Background
3. General framework
4. BATNA determination and filtering of alternatives
4.1. Definitions
4.2. Changing dominated to nondominated solutions by reducing price 4.3. Convex dominance and a continuous Pareto-optimal frontier 4.4. Using AIM
4.5. Using MAV
4.6. Starting with a preliminary choice
4.6.1. Using AIM
4.6.2. Using MAV
4.6.3. Not assuming a value function
5. A simulation
6. Conclusions
References
1. Introduction
The purpose of this paper is to tie together various existing material on negotiation, and propose a quantitative framework, based on existing research concepts, for carrying out negotiations. In addition to developing a framework and the associated mathematical theory, we perform simulations to explore the efficacy of negotiating for more than one alternative at the same time. Negotiation is a way for parties to reach agreement in a dispute or in making a joint decision. In general, negotiations involve one or more issues that need to be settled between two or more involved parties (Raiffa, 1982). Table 1 shows a typology of the kinds of negotiations possible based on the number of negotiable issues and the number of parties involved. In the paper we consider two-party, one-issue negotiations. Table 1.

A classification of negotiation problems
|Parties |Negotiable issues | |[pic] |[pic] | | |One negotiable issue |Many negotiable issues | | |[pic] |[pic] | |Two parties |Two parties, one issue |Two parties, many issues | |Many parties |Many parties, one issue |Many parties, many issues |

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The Best Alternative To a Negotiated Agreement (BATNA) introduced by Fisher et al. (1991) is the best a negotiator can do if negotiations fail, or if the negotiator walks away from a negotiation. A negotiator can and should terminate a negotiation if his BATNA is better than the likely outcome of the negotiation. A negotiator’s...

References: 2. Background
The concept of reference point was introduced in prospect theory ([Kahneman and Tversky, 1979] and [Tversky and Kahneman, 1992])
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