Negotiation: The Final Offer Arbitration Challenge
Chloe Xu, Australia, Premium Member
Being unreasonable in negotiations makes the process dysfunctional and costly. Also it harms the relationship between the parties involved. To promote reasonableness in negotiations, Bazeman and Kahneman (2016) introduce a new tool that borrows ideas from resolving labour disputes: The 'Final-offer Arbitration Challenge'.
COUNTERING AN UNREASONABLE NEGOTIATION OFFER
In short, as a negotiator, you can start by asking your counterpart to make a demonstrably fair offer. Then, if the offer is unreasonable, you challenge your counterpart to take his offer and yours to an arbitrator who must decide for one or the other (instead of splitting the difference between them). The strategy works because it exposes the unreasonableness of one party’s position and may cause the party subject to the challenge to quickly return to the table with a more reasonable position.
WHEN TO USE FINAL-OFFER ARBITRATION CHALLENGE STRATEGY. CONDITIONS
The Final-offer Arbitratio...