THE WHARTON SCHOOL

THE WHARTON SCHOOL

OPIM 691: Negotiations (MGMT 691/LGST806)

Fall, 1996

Tuesday and Thursday 10:30-12

Vance B7

Professor Rachel Croson

Office hours Monday 2-4pm or by appointment

Office: 1322 SH-DH

Phone: 898-3025 (V)

E-Mail: CrosonR@opim.wharton.upenn.edu

I can be reached via voicemail, electronic mail or through the departmental assistants in 1300 SH-DH.

The Teaching Assistant for this class is Yul Chung. Yul is responsible for logistics regarding cases and can be reached via phone or e-mail.

Phone: (215) 243-0915

E-Mail: chung45@wharton.upenn.edu

COURSE DESCRIPTION

Negotiations is the art and science of creating agreements between two or more parties. This course has two purposes. First, we will discuss and apply theories developed as guides to improving negotiations (the science). Second, students will develop and sharpen negotiating skill by actually negotiating with other students in realistic settings (the art).

This course is designed to complement the skills learned in other courses at Wharton. A basic premise of the course is that while analytical skills are vital to the discovery of optimal solutions to problems, businesspeople need a broad array of negotiation skills to get those solutions accepted and implemented. The course will provide participants the opportunity to develop those negotiation skills through direct experience and to understand negotiation in useful analytic frameworks.

THE WHARTON SCHOOL

OPIM 691: Negotiations (MGMT 691/LGST806)

Fall, 1996

Tuesday and Thursday 1:30-3

Vance B7

Professor Rachel Croson

Office hours Monday 2-4pm or by appointment

Office: 1322 SH-DH

Phone: 898-3025 (V)

E-Mail: CrosonR@opim.wharton.upenn.edu

I can be reached via voicemail, electronic mail or through the departmental assistants in 1300 SH-DH.

The Teaching Assistant for this class is Yul Chung. Yul is responsible for logistics regarding cases and can be reached via phone or e-mail.

Phone: (215) 243-0915

E-Mail: chung45@wharton.upenn.edu

COURSE DESCRIPTION

CASES

Since negotiations occur in all kinds of organizations, and in many functional areas within organizations, we will confront a wide variety of examples. Most of these examples are cases that you will actually negotiate. These cases are the heart of the course. Many cases will be negotiated in class; you should come thoroughly prepared for these. Other cases will be conducted outside of class. For these, you and your partner and are responsible for arranging times outside of class to negotiate.

I urge you to read the cases in advance and think about them before actually negotiating. Preparation will generally get you a better deal. When you are negotiating in a large group, failing to prepare can hurt the entire group. I also urge you to keep up with the assigned readings. The readings are designed to be relevant to the specific case with which they are associated.

Several of the cases will be graded. Here's how: Typically a student will play one of two or more roles in a case—a buyer or a seller for example. The numerical performance of a student who is assigned to be a buyer will be compared with the performance of other buyers. Let X denote the numerical measure of our buyer's performance (e.g. his the value for the good minus the price he paid). The buyer's graded score for X is given by the following formula:

Score (X) = X - Lowest X

Highest X - Lowest X

This formula assigns the buyer with the lowest X a score of zero and the buyer with the highest X a score of one. All other scores will be between zero and one. Adding a student’s scores across the graded cases will determine their aggregate case grade. Your aggregate case grade will constitute 40% of your course grade.

Students are expected to attend all classes and to participate in all negotiations exercises and class discussion. This intensive, active student participation is critical to the workings of this class. Each student's ability to gain value from this course depends on every other student's wholehearted contribution and commitment. Moreover, in-class exercises will not work if the key parties are not present. Therefore, students who have heavy recruiting schedules or other heavy personal or professional obligations this semester should consider whether they can make a commitment to this class.

If you must miss any class you need to provide notice to me at least one week in advance. If that class involves an in-class case you will earn a grade of -.25 for that case. Any cases missed without one week’s notice will earn a grade of -1 for that case. Not all in-class cases are listed here; thus advance notice for missing any class is required. At the end of the semester one case grade will be dropped before computing your aggregate case grade; however grades of -1 will not be dropped.

Case participation includes full preparation for cases. Lack of preparation will earn a grade of -.25 for that case.

On the last page of this syllabus is a list of the scheduled cases and indications of what will be graded. Ensure your availability on each of these dates before committing to this course. The cases with ranges of dates are to be negotiated out of class during the days listed. Be sure you are available on at least one of those days for each case before committing to this course. Although this list is as complete as I can make it at this time, there is some flexibility in the scheduling based on how long the cases take to negotiate. There may be negotiated cases that are not on this list.

As in all classes, it is your responsibility to obtain case and other materials distributed in class and to hand in required assignments on time. Cases handed in after their deadline will not be accepted. Other assignments handed in after their deadline will be graded down appropriately.

There are three additional rules about the cases.

(1) The written background material you will receive in each case is meant to represent the preferences and knowledge of real people. You should not show anyone else your written material because in natural settings you could not show people the things the written material represents.

(2) You should not make up facts which are not in the case. People make up facts in real negotiations, of course, but facts that are made up in these cases are hard for others to check. We have also found that people who make up facts do not learn to negotiate. Lying gives them a strategic advantage (of debatable ethicality) which enables them to do well without facing the risk of severe legal and reputational penalties, and without facing up to the more fundamental and difficult aspects of negotiating. If a direct question is asked about which your case gives you no information you should reply “that information isn’t available to me.” Using this reply when you do, in fact, have information which answers the direct question is the equivalent of making up facts.

(3) Many of these cases will involve multiple issues. The number of points a participant receives for each issue will depend on his or her role in the case. You should never reveal your point structure to the other participants in the negotiation. This rule will be made more clear when we get to the relevant cases in the course.

Finally, we will explore international computer-mediated negotiations this semester in a case negotiated via e-mail. Students are responsible for getting and knowing how to use e-mail for this case.

FINAL PAPER

There is no final exam in this course, however you are required to write a term paper (30% of your course grade). The paper must be completed and earn a passing grade to receive credit for the course. Groups of two, but no larger, are permitted. I am much more concerned about quality than about quantity.

Use the paper as an opportunity to explore an aspect of negotiations of interest to you. I am extremely flexible about paper topics. You might examine an important historical negotiation, review the literature regarding a particular aspect of negotiation behavior, do your own experiment regarding negotiation behavior, re-analyze the data generated by the class exercises with some particular hypothesis in mind, analyze a particular negotiation with which you are familiar (e.g. one involving yourself or a firm with whom you were employed), compare formal analyses of the negotiation process and real-world behavior or whatever. It is more important that you are genuinely curious about the topic of your paper than whether it fits nicely into any particular category.

I will collect paper topics during the semester to provide feedback. There will be an opportunity at the end of the course for interested students to present their papers to the class for extra credit.

CLASS PARTICIPATION

Another 15% of your grade will be determined by your class participation. Excellent in-class comments go beyond what happened in a particular negotiation into why and how it happened, as well as provide links between the topic under discussion with other cases, speakers or outside situations. Absences and nonparticipation in class discussion will be reflected in the class participation grade.

ADDITIONAL ASSIGNMENTS

There will be six additional individual assignments that you will be asked to do outside of class. These will constitute the final 15% of your grade.

SUMMARY AND BREAKDOWN OF GRADING

Cases 40%

Final Paper 30%

Class Participation 15%

Additional Assignments 15%

READINGS

There are three required and one optional texts, all of which are available at the bookstore:

Required

William Fisher and Roger Ury Getting to Yes (Penguin 1991)

Avinash Dixit and Barry Nalebuff Thinking Strategically (W.W. Norton 1991)

Max Bazerman and Margaret Neale Negotiating Rationally (Free Press 1992)

Optional

Howard Raiffa The Art and Science of Negotiation (Harvard University Press, 1984)

You should read (or re-read) Getting to Yes as soon as possible. It is a short and accessible book and contains insights and lessons that permeate the course and are worth learning early on. Many of you will have read this book as part of the first-year curriculum; please read it again.

Dixit and Nalebuff's text provides some background to game theory and strategy through a wide variety of illustrative examples. Bazerman and Neale's book focuses on common mistakes in the negotiation process and strategies for improving your negotiation skills. Assigned readings from these texts are indicated in this syllabus. Although no readings will be assigned out of Raiffa’s recommended text, it is a classic in the field and a good addition to your negotiation library. All four textbooks are also on reserve at Lippincott Library.

There is also a bulk pack of readings and cases (available at Wharton Reprographics). Reprographics will also keep track of the cost of providing the cases and photocopying handouts and bill the charges to enrolled students at the end of the semester.

GUEST LECTURES

There are a number of guest lectures scheduled this semester. These lectures will provide an outside perspective on negotiations. These lectures are common to all sections of the course, and viewing these lectures is mandatory. Details about the lectures will be made available as the dates approach.

To keep the number of semester hours close to the university prescribed level, two regularly scheduled class periods will be canceled: Tuesday, October 1, and Thursday, October 17.

CLASS FEEDBACK

After each negotiation the negotiating parties will meet briefly and provide feedback on their counterpart’s performance. This feedback will be unstructured and should focus on the efficacy of tactics used and the negotiator’s style.

On the penultimate day of class, all students will provide some more structured feedback using rating sheets I will give you. This will have no effect on your course grade; it is only to give you feedback on your negotiation style and effectiveness. Five questions will be addressed in this evaluation:

(1) Would you feel comfortable having this person represent you in a one-time negotiation?

(2) Would you feel comfortable having this person represent you in a negotiation where long-term relationships are important?

(3) Do you feel this person diligently prepared the cases assigned?

(4) Do you feel this person added value to the class discussion?

(5) Do you feel this person role-played the cases accurately and fairly?

(6) Do you feel this person acted in a manner you would describe as consistent with ethical business standards?

(7) Overall, how would you rate this person’s negotiating style?

SCHEDULE OF CLASSES

Thursday, September 5 Introduction

Hand in: Face Cards

In Class: Overview of Syllabus

Negotiate Case #1: Salty Dog

Hand out: Syllabus

Tuesday, September 10 Distributive Negotiations: Salty Dog

Prepare: Getting to Yes

"Professor Lax buys his dream house" in bulkpack

Bazerman and Neale, Preface, Chapter 1 and Chapter 9

In Class: Discussion of Distributive Negotiations

Discussion of Case #1: Salty Dog

Feedback on Case #1: Salty Dog

Hand out: Case #2: Used Car 2

Thursday, September 12 Distributive Negotiations: Used Car 2

Prepare: Case #2: Used Car 2

“When is it Legal to Lie in Negotiations?” in bulkpack

“Lying in Negotiations” in bulkpack

In Class: Negotiate Case #2: Used Car 2

Discussion of Case #2: Used Car 2

Feedback on Case #2: Used Car 2

Discussion on Lying

Hand Out: Case #3: Appleton-Baker due Monday, September 16 at 4pm

Assignment #1: Judgment Questionnaire due Monday, September 16 at 4pm

Monday, September 16 at 4pm

Results of Case #3: Appleton-Baker due in box outside 1322 SH-DH

Assignment #1: Judgment Questionnaire due in box outside 1322 SH-DH

Tuesday, September 17 Distributive Negotiations: Appleton-Baker

Prepare: Bazerman and Neale, Chapter 13

In class: Discussion of Case #3: Appleton-Baker

Feedback on Case #3: Appleton-Baker

Hand out: Assignment #2: Biases Examples due in class Thursday, September 19

Thursday, September 19 Biases and Judgment

Prepare: Bazerman and Neale, Chapters 4, 5 and 6

Bring cash to class

Hand in: Assignment #2: Biases Examples

In Class: Discussion of biases

Play games

Hand out: Assignment #3: Game Theory due Monday, September 23 at 4pm

Case #4: Bentz-Smith due Wednesday, September 25 at 4pm

Monday, September 23 at 4pm

Assignment #3: Game Theory due in box outside 1322 SH-DH

Tuesday, September 24 Game Theory

Prepare: Dixit and Nalebuff, Introduction, Chapters 1 and 2

Bazerman and Neale, Chapters 2, 7, 8 and 16

In class: Discussion of in-class games and Game Trees

Wednesday, September 25 at 4pm

Results of Case #4: Bentz-Smith due in box outside 1322 SH-DH

Thursday, September 26 Decision Theory and Uncertainty: Bentz-Smith

Prepare: The Basic Decision Dilemma” in bulkpack

In class: Discussion of Case #4: Bentz-Smith

Feedback on Case #4: Bentz-Smith

Discussion of Decision Trees

Hand out: Case #5: Sudden Impact

Tuesday, October 1 Class Canceled

Thursday, October 3 Deadlines: Sudden Impact

Prepare: Case #5: Sudden Impact

Dixit and Nalebuff, Chapter 11

In class: Negotiate Case #5: Sudden Impact

Discussion of Case #5: Sudden Impact

Feedback on Case #5: Sudden Impact

Hand Out: Case #6: Oil Pricing

Tuesday, October 8 Oligopoly: Oil Pricing

Class meets at MBA Pub

Prepare: Case #6: Oil Pricing

In class: Negotiate Case #6: Oil Pricing

Thursday, October 10 Oligopoly: Oil Pricing

Prepare: Dixit and Nalebuff, Chapter 4

Bazerman and Neale, Chapter 17

In Class: Discussion of Case #6: Oil Pricing

Feedback on Case #6: Oil Pricing

Hand out: Case #7: Union-City due Monday, October 21 at 4pm

Case #8: CP-MegaMarket due Wednesday, November 20 at 9am

Tuesday, October 15 Class Canceled: Fall Break

Thursday, October 17 Class Canceled

Monday, October 21 at 4pm

Results of Case #7: Union-City due in box outside 1322 SH-DH

Tuesday, October 22 Integrative Negotiation: Union-City

Prepare: Bazerman and Neale, Chapters 3, 10 and 11

“Signaling” in bulkpack

In class: Discussion of integrative negotiations and Case #7: Union-City

Feedback on Case #7: Union-City

Hand out: Assignment #4: Walkenhorst due Thursday, October 24 in class

Possible paper topics; paper topics due Tuesday, October 29 in class

Thursday, October 24 Signaling and commitment

Prepare: “The Game of Chicken” in bulkpack

"Notes on Signaling What You Know" in bulkpack

Dixit and Nalebuff, Chapters 6 and 8

Hand in: Assignment #4: Walkenhorst

In Class: Discussion of signaling and commitment

Hand out: Case #9: Agency-House due Monday, October 28 at 4pm

Monday, October 28 at 4pm

Results of Case #9: Agency-House due in box outside 1322 SH-DH

Tuesday, October 29 Agents and Agency Theory: Agency-House

Prepare: Dixit and Nalebuff, Chapter 12

Bazerman and Neale, Chapter 15

“Home Sellers Trimming Brokers Fees” in bulkpack

“Home Buyers Agents Threaten Brokers” in bulkpack

“When Should We Use Agents” in bulkpack

Hand in: Paper topics

In class: Discussion of Case #9: Agency-House and incentives

Feedback on Case #9: Agency-House

Hand out: Case #10: Alpha-Beta Robotics

Case #11: Job Offers due Monday, November 4 at 4pm

Assignment #5: Description and self-analysis due Tuesday, November 5 in class

Thursday, October 31 Negotiation Styles: Alpha-Beta Robotics

Prepare: Case #10: Alpha-Beta Robotics

In class: Negotiate Case #10: Alpha-Beta Robotics

Monday, November 4 at 4pm

Case #11: Job Offers due in box outside 1322 SH-DH

Tuesday, November 5 Negotiation Styles: Alpha-Beta Robotics and Job Offers

Prepare: "Evaluating Job Opportunities and Negotiating" in bulkpack

“Negotiating with Foreigners” in bulkpack

"Nonverbal Behavior" in bulkpack

Assignment #5: Description and self-analysis

Hand in: Assignment #5: Description and self-analysis (and original videotapes)

In class: Discussion of Case #10: Alpha-Beta Robotics

Feedback on Case #10: Alpha-Beta Robotics

Discussion of Case #11: Job Offers

Feedback on Case #11: Job Offers

Discussion of body language noverbal communication

Hand out: Case #12: Harboco

Thursday, November 7 Multi-Party Negotiations: Harboco

Prepare: Case #12: Harboco

In Class: Negotiate Case #12: Harboco due Monday, November 11 at 4pm

Monday, November 11 2pm-4pm

Final voting available for Case #12: Harboco

Results due at 4pm in box outside 1322 SH-DH

Tuesday, November 12 Multi-Party Negotiations: Harboco

Prepare: Bazerman and Neale, Chapter 14

In class: Discussion of Case #12: Harboco

Feedback on Case #12: Harboco

Hand out: Case #13: Towers Market

Thursday, November 14 Multi-Party Negotiations: Towers Market

Prepare: Case #13: Towers Market

Create scoring sheet consistent with given preferences

In class: Negotiate Case #13: Towers Market

Tuesday, November 19 Multi-Party Negotiations: Towers Market

Prepare: "Thinking Coalitionally" in bulk pack

In class: Discussion of Case #13: Towers Market

Feedback on Case #13: Towers Market

Wednesday, November 20 at 9am

Case #8: CP-MegaMarket due in box outside 1322 SH-DH

Thursday, November 21 Computer Mediated Negotiation: CP-MegaMarket

In class: Discussion of Case #8: CP-MegaMarket

Hand out: Case #14: Mediation Exercises due Monday, November 25 at 4pm

Monday, November 25 at 4pm

Case #14: Mediation Exercises due in box outside 1322 SH-DH

Tuesday, November 26 Mediation

Prepare: “Inside the Hearing Room” in bulkpack

In class: Discussion of Case #14: Mediation Exercises

Feedback on Case #14: Mediation Exercises

Discussion of Mediation

Hand out: Assignment #6: Own Negotiation Analysis due Tuesday, December 3 in class

Thursday, November 28 Class canceled: Thanksgiving Break

Tuesday, December 3 Papers

In class: Student presentations of papers

Class feedback

Hand in: Assignment #6: Own Negotiation Analysis

Thursday, December 5 Conclusion

Prepare: Dixit and Nalebuff, Chapter 13

Bazerman and Neale, Chapter 18

“Games End” in bulkpack

In class: Conclusions

Friday, December 20 at 4pm

Final Paper due in box outside 1322 SH-DH

Schedule of Negotiation Cases

Case Date Negotiated Date Discussed____

Case #1: Salty Dog September 5 September 10

Case #2: Used Car 2 September 12 September 12

Case #3: Appleton-Baker (graded) September 12-16 September 17

Case #4: Bentz-Smith (graded) September 19-25 September 26

Case #5: Sudden Impact (graded) October 3 October 3

Case #6: Oil Pricing (graded) October 8 October 10

Case #7: Union-City (graded) October 10-21 October 22

Case #8: CP-MegaMarket (graded) October 10-November 20 November 21

Case #9: Agency House (graded) October 24-28 October 29

Case #10: Alpha-Beta Robotics (graded) October 31 November 5

Case #11: Job Offers October 29-November 4 November 5

Case #12: Harboco (graded) November 7-11 November 12

Case #13: Towers Market (graded) November 14 November 19

Case #14: Mediation Exercises November 21-25 November 26

Schedule of Assignments

Assignment Pick up Due________

Assignment #1: Judgment Questionnaire September 12 September 16

Assignment #2: Bias Example September 17 September 19

Assignment #3: Game Theory September 19 September 23

Assignment #4: Walkenhorst October 22 October 24

Assignment #5: Description & Self-Analysis October 29 November 5

Assignment #6: Own Negotiation Analysis November 26 December 3

Paper topics due October 29

Final papers due December 20