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Post No.: 0375ultimatum


Furrywisepuppy says:


So you were acquainted with added value and how this relates to power in negotiations in Post No.: 0319. Now if an ultimatum is given to you, such as, “Do you accept a 10:90 split of this prize?”, where no counter-offer is permitted and if you don’t accept this offer then neither you or the other party will get anything at all (this is essentially the ‘ultimatum game’ in game theory) – this could be because the other party is greedy to the point of being willing to spite their own face and lose any kind of deal they’d be better off having, just in order to seize a greater slice of the pie for themselves (a kind of ‘I want most of it or nothing at all’ proposal).


Yet rationally from your perspective, you’d be better off agreeing to their ultimatum than missing out on a deal altogether, thus the other party might succeed in their gambit. So for you, in the above example, receiving 10% of the prize is better than receiving 0%. Accepting anything above zero is rational regardless of how much the other party will get.


But this might turn out to be only a short-term rational decision. If the chances are high that you’ll interact with this other party again in the future, you might want to (temporarily) spite your own face and lose any kind of deal yourself in order to punish the other party for being greedy, so that they’ll hopefully learn to behave less greedily in the future (with you or other people). Plus if you accept unfair deals then other, third, parties might learn that you’re a pushover too.


This punishment, or the enforcement of social norms of fairness, won’t work as well though if this other party has a decent ‘best alternative to a negotiated agreement’ or BATNA i.e. if you refuse them then they could just easily ask somebody else instead. If this is the case then their ultimatum will be serious.


So one way to have power in a negotiation is to be in a position to give an ultimatum, and that means you having more alternative options (e.g. alternative potential buyers/sellers) than the other party. But even if you do have decent alternative options and the other party doesn’t – don’t be too greedy because most people reject overly greedy offers even if it hurts them. Most people will accept no less than a 30:70 split. And if you try this gambit and you really don’t have decent alternative options then it’ll backfire in embarrassment and you’ll end up with a worse deal because the other party will learn that you were just bluffing!


Most people also won’t believe you if you claim that your first offer is your limit or that you won’t negotiate; nor do most people respond well to feeling like they’re put in a position of having their terms dictated to them. People instinctively don’t like things forced upon them, even if it’s something that’s truly in their best interests (which could be considered irrational); or people will still tend to come back with a counter-offer regardless of your supposed ultimatum.


So rather than say, in a salary negotiation, “I want £40k otherwise I won’t work for you” – say, “If you make it £40k then I will work for you” instead. This way, the offer is the same except you’ve not made any threat about what you’ll do if they don’t meet your offer, hence no bluff can be called if they refuse it. Woof.


Ultimatums are obviously far less effective if the other party knows that you’re going to always be better off with a deal than no deal i.e. you’re hoping to not leave without a deal (if you behave rationally that is). Bluffing in an attempt to secure a better deal for yourself may work or it may backfire if no deal is made.


If someone gives you an ultimatum then reframe it to show that the ultimatum isn’t real. Hypothetical proposals and the responses to these can reveal a lot about where a party’s true boundaries are – such as whether they are willing to make a deal but the only issue is the price, or whether their intransigence or ultimatum is real or false – and they may even allow the parties to come up with radical alternative solutions too. So instead of reciprocating with a threat of your own, look for another option that would make them dramatically better off while still serving your own interests. Deflect any ultimatums by presenting a hypothetical proposal or two that’ll lead to you saying something along the lines of, “So you’re saying that you would never consider this kind of offer if it were on the table?” For which the other party would seem barking mad to not consider that kind of offer, which would in turn contradict their own ultimatum. Even if you don’t actually offer them this option, them considering it would demonstrate that they are open to options other than their own ultimatum. Skills!


Ultimatums are in essence threats of a ‘take it or leave it’ kind. Arguing based on principles such as fairness, risk (a)symmetries, incentive-sharing or potential regrets is more persuasive than just demanding more because you want more or because you use threats.


So don’t fight fire with fire – logically fight fire with water i.e. put those flames out! Instead of reciprocating a threat, inflammation or ultimatum – say that you could reciprocate their threat with an equal threat of your own but that all this won’t help you both reach a deal hence let’s try a different approach. Rather than call out their lies or aggression (at least explicitly) and make them emotionally embarrassed and lose face (which will make it even less likely that they’ll come back and agree to a deal with you, even if it’s in their interests) – just restate that, all things considered, your offer is the best you can do for them. Don’t sour the relationship.


It’s always best to start and keep negotiations going in a friendly, cooperative manner, no matter the other party’s own interests, because you want the other party to invest their time and effort into the process – the more they invest into the negotiations then the less they’ll want to divest and the more they’ll want to conclude with some kind of payoff (i.e. a deal) at the end of it all, otherwise all that effort will seem like for nothing (even though this might potentially amount to committing a sunk cost fallacy). In any kind of context, all else being equal, the more that’s invested into something (or someone), the more desirable that something (or someone) becomes to obtain or keep.


This can however work on you too, hence you must be aware of tactics such as the other party ‘nibbling’ at the deal to their favour near or at the end i.e. asking for small concessions after the main deal has just been made or once it seems like an agreement is about to be made. Use humour to implicitly or gently call out their nibble to defuse their last-minute request. If, once a deal seems to have been agreed, the other party tries to nibble a little more (and more) from you then you really ought to deny them. You might be generous and meet their nibble in the middle or counter-offer for something in reciprocation, but do so on the condition that that’ll be it and they’ll sign on the line. Do not let nibbles escalate, particularly without reciprocation.


Having said that, you might try nibbling at them to ensure from their perspective a deal will not be lost at the last hurdle. You could ask them to throw in a few relatively small extras in the end, one at a time, and they might actually give them to you to ensure the deal goes through. Well if you don’t ask, you won’t get! (Albeit don’t be insulting.)


Now if you’ve done the maths, checked the logic and you’re sure you’re right – then don’t give up fighting for your point of view! Slow down, present some concrete examples of the fluffy benefits that both parties will receive, and ask to understand why they think your logic is wrong if they think it’s wrong.


One strategy sometimes employed is to stubbornly make it seem like one or two options are totally out of the question in order to frustrate the other party into offering the next best option on the table, which was actually your intended target option all along. However, this approach may get you the deal you want but it’ll likely sour the relationship if your relationship with the other party needs to be ongoing, and it may stifle the negotiation environment, where you and they could’ve collaborated in problem-solving instead to come up with better alternative options than what were originally on the table.


Some parties try to play ‘good cop, bad cop’ by one person saying that they’re the ‘good cop’ and if a deal isn’t done today then another person, a ‘bad cop’, will have to take over the negotiation. This is of course a thinly-veiled threat. (The ‘good cop, bad cop’ setup sometimes works though because the other party feels that someone from the opposing party is on their side, but of course this is false.) You could counter it by stating that they’re also lucky today for some reason, such as your partner isn’t here and he/she’s a tough negotiator too (stated with a bit of humour). The aim is to let them know that you know what they’re trying to do but that you’re not fazed by it – yet at the same time not making them feel small or defensive about you knowing it. It requires high social intelligence to defuse aggressive strategies from the other side without showing yourself as weak, nor escalating matters. Don’t feel threatened yet don’t threaten them either – this keeps relations and the negotiation most productive.


If a potential buyer threatens to come up with a product that’ll compete with your product and they claim that they’ll crush you in the market if you don’t sell your company to them, then it’s likely to be an idle threat otherwise they’d be doing it already and they wouldn’t be trying to buy your company today. If you’re on the other side and you genuinely would come up with a competing product if you cannot buy a certain company out or use their products then make such threats to this company indirect and non-personal and explain why you must do it. You don’t want to make any future relationship with them feel awkward if there’ll be a deal made with them after all.


Fighting fire with fire might work with some people in some situations though, such as if they’re clearly using delaying tactics (and you know they know that). If so, you’ll need to get the initiative back somehow. But this does require guessing correctly whether the other party will react well to being threatened or not, and this in turn requires you to know the other person well enough by being in a close professional relationship with them, and that means you’ll need to have built this relationship up with them over time. It also helps when you know you have the power (e.g. you know that they’re not going to walk away from a deal).


Woof. But overall, be the psychologically bigger dog. Think long-term and don’t sour relations. It’s a small world and you may bump into each other again or word will go around to others about your reputation. Stayed focused on your own game and your and their objectives, and try to expand the pie. Be like water – water flows and finds the cracks, to paraphrase big dog Bruce Lee.


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