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This is to certify that the
thesis entitled

The Effects of Power and Trust
on Buyer/Seller Negotiations

presented by

Shannon Gathman

has been accepted towards fulfillment
of the requirements for

Ma stemLAntsdegree inCoumunication

 

6 December 6, 1996

 

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MSU le An Affirmative Await/Emu Opportunity lnetltuion
Wt

THE EFFECTS OF POWER AND TRUST ON BUYER/SELLER
NEGOTIATIONS

By

Shannon Gathman

A THESIS
Submitted to
Michigan State University

in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS

Department of Communication Arts and Sciences

1996

ABSTRACT

THE EFFECTS OF POWER AND TRUST ON BUYER/SELLER
NEGOTIATIONS

By

Shannon Gathman

This study was concerned with the issue of how power and trust combine to affect
the degree of integration evidenced in joint outcomes of negotiation situations. It came
about afier reviewing various literature with a special focus on a study by McGillicuddy
et a1. Previous literature suggested that an external power threat, such as an arbitrator,
increased negotiators concession making. This study was concerned with the influence of
both power and trust on information sharing rather than concession making. The results
indicate no significant effects for power on integration. The data did reveal an interesting
effect for merely talking about trust, whether in a positive or negative framework, prior to

negotiation tended to reduce joint profits significantly.

ACKNOWLEDGEMENTS

This document is the culmination of a lot of hard work and a lot of fun. I’d like to
thank my committee for their assistance; they assigned the work and tried to keep it fun!
They also helped to keep me on track throughout many difficult times by reminding me
that I needed to keep perspective in order to keep my sanity.

Another vital but less often recognized component of the graduate school process
is friendship. Mary Kay Casey and Scott Preston, through their support, humor, and
understanding have turned a journey that without them would have been unbearable, into
an exciting, thought-provoking, sometimes painful but always interesting, worthwhile
trip. I am thankful for their presence in my life.

Along with the friends that are made, there is the group that you share your first
year with. Many of them come to be fiiends, because together you’ve survived an
experience you think no one else can understand. And ofien, they’re a major part of the
reason you’ve survived. Ron Hidalgo falls into this category. We started our first year
together and have been through hell and high water since. I want to thank Ron. I

couldn’t have done it without him.

iii

TABLE OF CONTENTS

LIST OF TABLES ............................................................................................................... v

CHAPTER 1

INTRODUCTION ............................................................................................................... 1

CHAPTER 2

LITERATURE REVIEW .................................................................................................... 5
Negotiation ............................................................................................................... 5
Arbitration ................................................................................................................ 7
Trust ......................................................................................................................... 8
Hypothesis .............................................................................................................. 10

CHAPTER 3

METHODS ........................................................................................................................ 12
Subjects .................................................................................................................. 12
Table l - Subject Distribution Across Cells .......................................................... 12
Procedures .............................................................................................................. 12
Manipulations ........................................................................................................ 14
Table 2 - Condition Descriptions ........................................................................... 15

CHAPTER 4

ANALYSIS/RESULTS ..................................................................................................... 1 8
Table 3 - Mean Profits ........................................................................................... 18
Table 4 - F Table for 3-way ANOVA .................................................................... 19
Table 5 - Regression for Continuous Variables ..................................................... 20
Table 6 - Regression for Dichotomous Variables .................................................. 21

CHAPTER 5

DISCUSSION .................................................................................................................... 22

APPENDICES ................................................................................................................... 26

iv

LIST OF TABLES

Table l - Subject Distribution Across Cells ...................................................................... 12
Table 2 - Condition Descriptions ....................................................................................... 15
Table 3 - Mean Profits ....................................................................................................... 18
Table 4 - F Table for 3-way AN OVA ................................................................................ 19
Table 5 - Regression for Continuous Variables ................................................................. 20
Table 6 - Regression for Dichotomous Variables .............................................................. 21

Person A:
Person B:
Person A:
Person B:
Person A:
Person B:

Person A:
Person B:
Person A:
Person B:
Person A:
Person B:
Person A:
Person B:
Person A:
Person B:

Chapter 1

Introduction

You can’t go G, F, and F?

No.

Why? You said F’s across the board would be fine.
I lied.

You should be willing to fluctuate somewhat.
Correct, but I did not look at my number that I had
to reach as well.

I think you’re lying.

I am not lying to you, I promise.

Hmm...so now you can’t even go all F’s huh?

No. Maybe we can go all E ’s.

You couldn’t go all A’s.

E ’s. No I could go all A 's I just couldn ’t go all E’s.
You can go all E’s?

If we compromise.

Oh my God. This is ridiculous.

I know. I guess one of us is gonna lose money or
something

This excerpt was taken from transcripts of buyer/seller negotiations. Buyer/seller
negotiations are just one of many different kinds of negotiations. Negotiation begins
early in life; it can take many different forms, such as negotiations over behavior. For
example, a child promises to “be good” in exchange for a cookie. This is one example of
the diverse negotiations that take place starting early in life. As people grow older they
continue to negotiate; however, the reasons for negotiation, as well as the style of
negotiation, become more sophisticated.

Along with the various types of negotiation come a myriad of ways to deal with any
negotiation situation. The most effective negotiation strategy, advocated by Fisher & Ury
(1981), is an integrative one; yet the majority of people involved in negotiation situations

do not reach integrative solutions An integrative solution to a negotiation situation is

l

2
one in which both parties reach a high level of joint gain. Studies have sought to

determine what deters people from reaching these types of solutions. Thompson and
Hastie (1990) have determined that when people maintain fixed-sum perceptions
throughout a negotiation, they are less likely to reach an integrative solution. The
employment and reciprocation of distributive bargaining tactics also hinders attainment
of a fully integrative solution (Tutzauer & Roloff, 1988). Truly integrative outcomes
result from the search for information rather than the strict concession/convergence
strategy of distributive bargaining. This study is concerned with how power and trust
affect the degree of integration shown in the outcomes of buyer/seller negotiations;
specifically, does the threat of losing power to an external source coupled with varying
degrees of trust between negotiators promote more integrative outcomes?

To this end, power is manipulated in the form of a third party arbitrator. Power is
defined as the ability to control negotiation outcomes. Therefore, participants are told an
arbitrator will step in and make a binding decision regarding their negotiation if they are
unable to reach an agreement within the 20 minute time limit. This intervention
effectively removes all power from the buyer and seller. The severity of the power threat
is varied across conditions, ranging from the mere threat of an arbitrator’s presence to an
arbitrator actually being in the room during the negotiations.

Another variable, trust, is also manipulated. Trust is manipulated to alter the
relationship between the parties to better understand the impact on power. Trust levels
between buyers and sellers range from no mention of trust at all (the control condition) to
either a high or low trust condition. Trust is manipulated by providing information

detailing a past relationship with the other party. If the trust condition is to be high,

3

positive information regarding their history is given; whereas, if trust is to be low, the
information about previous interactions indicates they were negative. All of these
manipulations are designed to determine if negotiation outcomes differ under various
perceptions of power and trust.

The underpinnings of this study come from an article by McGillicuddy, Welton,
and Pruitt (1987). The McGillicuddy et al study was concerned with different types of
third party intervention taking place after a mediation situation failed. The authors put
forth eight hypotheses in their study which were designed to determine how both the
negotiators and the third parties would respond under different conditions. More
specifically, the McGillicuddy et al article detailed a pilot laboratory experiment that was
designed to familiarize researchers with the measures and manipulations before going
into the field. The pilot study did not yield any significant findings, but did show some
nearly significant results indicating that negotiators rated themselves less serious about
reaching an agreement in straight mediation situations than when they expected
arbitration to follow a failed mediation session. This pilot experiment was the jumping
off spot for the current study.

The outcomes of the pilot study led to this study’s expansion of the use of power
in negotiation. In this study, power threats, in the form of a third party arbitrator, were a
key focus. Negotiators were either threatened with the use of an arbitrator, similar to the
aforementioned study, or there was actually an arbitrator present during the negotiation to
make the power threat even more real. This increased attention to power’s affect on

outcomes led to another difference between the studies; the focus on mediation.

4

In this study, there is no mediation taking place; whereas in the McGillicuddy et
a1 study, there was a mediator present during all negotiations. In that study the main
focus was on how the outcomes differed across expectations of intervention on the part of
the negotiators. In the current study, the negotiators have not mediated and their
outcomes are being measured to determine how they respond to being threatened with
arbitration. They are negotiating for the first time and the main focus is on how the threat
of arbitration affects their integrativeness as evidenced by their outcomes.

Another departure from the McGillicuddy et a1 study stems directly from the
change in focus from mediation to arbitration; trust between negotiators was touched
upon in some of the underlying assumptions and hypotheses of the McGillicuddy et a1
study, but never really brought to the forefront. In this study, this issue of trust is
manipulated to alter the relationship between the parties to better understand the role of
power in negotiation.

This study on power and trust, as they relate to negotiation, is an outgrowth of
work done by McGillicuddy et al. Power is defined as control over outcomes, and trust is
introduced to change the negotiator’s relationship with respect to power. These two
variables are manipulated and the negotiation outcomes are then measured to determine

the degree to which they are integrative.

Chapter 2

Literature Review

The literature review will focus on the dependent variable, negotiation outcomes,
as it relates to the two independent variables, power and trust. First negotiation as it
relates to outcomes will be discussed. Then power, defined as control over outcomes and
operationalized as a third party arbitrator, will be reviewed in relation to outcomes.
Finally, trust will be looked at with a focus on how it impacts the relationship between
the negotiators, which in turn affects power.
Negotiation

If there is a need for negotiation, it can be assumed that there is some degree of
conflict. In addressing conflict, Rubin (1989) differentiates between the idea of conflict
settlement and conflict resolution. Conflict resolution implies an underlying change in
attitude that ends the conflict. Conflict settlement, on the other hand, stresses the end of
the conflict, but not necessarily due to attitude change. This distinction is important,
because it is often more difficult to effect an attitude change than a behavioral change.
Another reason for differentiating between settlement and resolution is the sharpening
focus on negotiation.

As previously mentioned, the most productive negotiation strategy is integration.
An integrative solution is marked by a high degree of satisfaction between both parties in
regards to their outcomes (Kressel & Pruitt, 1989). Pienaar & Spoelstra (1991) have
classified integrative negotiation as going beyond the standard “win-win” idea generally

associated with integrative negotiation and refer to it as a “win more-win more” model of

6

negotiation. Disagreements are seen as much more costly than compromise, and there is
a focus on a continuous relationship existing between negotiators. Also, information
seeking and sharing are vital components of integrative bargaining.

In most negotiation situations there is information that is known by only one of
the two bargaining parties; the degree to which the parties disclose that information is one
measure of how integrative they are. Studies have shown that the more information is
shared between negotiators, the more likely it is that the outcome will approach the
highest level of integration (Rubin, 1994, Fisher & Ury, 1981). Another measure of
integration in negotiation can be found in the outcomes parties reached.

Fowler (1990:3) defines negotiation as

...a process of interaction by which two or more parties who

consider they need to be jointly involved in an outcome, but who initially

have different objectives, seek by the use of argument and persuasion to

resolve their differences in order to achieve a mutually acceptable

solution.

This definition stems from the understanding of negotiation not as a single skill but as a
process involving many different skills over time. In that process, power is one of many
principles that must be considered. Whether power between negotiators is real or
imagined, each party must be perceived by the other to have at least a modicum of power.
Without that perception, there is no reason for the parties to negotiation; the powerful
party can simply take what he or she wants rather than spend the time and energy
negotiating over it. Given that power between parties is necessary in negotiation, the idea
of that power being misused to the point that the negotiation never reaches a mutually

satisfying solution is not far behind. That being the case, one solution to a negotiation

stalemate is arbitration.

Arbitration

Arbitration takes the power to make a binding agreement regarding the
negotiation out of the hands of the negotiating parties and places it within the sole control
of the arbitrator. Negotiation is a widely accepted method for attempting to settle
conflict, but when negotiators fail to reach an agreement, a third party is often called
upon to intercede in the negotiation and facilitate the goal of conflict settlement (Rubin,
1989). Third party intervention can take many different forms, including mediation,
arbitration and conciliation. There has been much work done on the effectiveness of third
party intervention, as well as when and how it should be used (Rubin, 1981, Kressel &
Pruitt, 1989).

Mediators can certainly be viewed as a threat to power, especially when they are
also given arbitration authority. However, for mediators to be truly effective, they must
be well trained. Additionally, mediation is traditionally used to supplement and broaden
the power of the negotiators, which is the opposite of the effect being sought. A mediator
is generally agreed upon by both parties and the negotiators continue to have complete
power over their choices and outcomes when using mediation (Crowley, 1994).
Arbitration differs from mediation in that a lot of the power that originally belonged to
the negotiators gets transferred to the arbitrator. This is because the arbitrator generally
has the ability to make a binding decision regarding the dispute, whereas the mediator
merely makes suggestions that the negotiators can choose to ignore (Conlon, Carnevale,
& Ross, 1994).

As power has been defined as control over outcomes, arbitration becomes

important because once an arbitrator is brought in, he or she has that power. Raven &

8
Kruglanski (1970) talk about the power of the third party coming from social influences,

such as informational influence, coercive influence, reward influence, etc. Several
studies have shown that the power of a third party is instrumental in negotiation
situations. The McGillicuddy et a] study, upon which this study is based, found that
negotiators made more concessions more quickly when they were faced with a third party
with the power to make binding decisions, an arbitrator for instance, than when faced
with a third party whose only power was to make suggestions, such as a mediator.
Idaszak & Camevale (1989), recognizing the power of the third party, conducted a study
to determine the effects of third party reward and coercive power on negotiations. With
many studies showing that the power to make a binding decision that is characterized by
arbitrators results in negotiators increasing their concession making and cooperation, this
study looks to see if that power also leads to an increase in integrative negotiating
behavior.
T_r_us_t

Trust is manipulated to determine if there is a resulting change in the degree of
integration achieved in the negotiation outcome. One way to talk about trust is in terms
of how much information negotiators are willing to exchange. Putnam and Jones (1982)
indicate that disclosure of information and intentions have a direct impact on negotiation
outcomes.

Trust between negotiators is a crucial factor in the relationship between the parties
as well as in the outcome of the negotiation. If one negotiator does not trust the other,
more specifically, doesn’t believe in the validity of his or her stated position, it is quite

unlikely that they will willingly exchange valuable information. Hence, agreements

9

reached between parties with lower trust will be less integrative than those reached in
relationships marked by higher trust. Hiltrop & Udall (1995) talk about different stages
in negotiation and point out that whether or not the negotiators trust each other can
influence how they both approach the negotiation situation, as well as how they conduct
themselves during the negotiation. For instance, if there is a lack of trust in the
relationship between the negotiators, it is likely that their behavior toward one another
will be more contentious. This may cause them to lose sight of the overall goal of the
negotiation in the heat of emotion. If emotion comes into play to the extent that it
obscures the intended outcome of the negotiation, different personalities may respond
differently.

Johnson and Tullar (1972) conducted a study that related face-saving to
bargaining behavior. In that study, they discovered that individuals with a low need to
save face all reached agreement prior to an intervention when they were expecting
binding arbitration intervention to occur. However, individuals with a low need to save
face who were expecting non-binding mediation were farthest from an agreement.
Individuals with a high need to save face were closest to agreement when they were not
expecting any sort of intervention.

The idea of saving face can be linked to trust. If participants are in a condition
where there is high trust, there is less emphasis on the need to save face. If participants
are placed in a condition where there is low trust, there is a tremendous need to save face.
The variable of trust has been culled from previous work done on information exchange
and face-saving needs and behaviors. For instance, if the proposed study finds that even

in a high trust condition, more integration is evidenced when an arbitrator is present, the

10
currently held beliefs about negotiation could be altered. A finding that negotiations that

are supposedly "friendly" could still benefit from an arbitrator could significantly change
the way people use negotiation.
Hyp_othesis

The threat of arbitration was varied across three conditions: (1) the control, which
involved no mention of arbitration or any consequences of not reaching agreement within
the given time frame; (2) the threat of arbitration, where negotiators were told if they
were unable to reach an agreement in the specified time frame, an arbitrator would make
a binding decision for them; and (3) the arbitrator present condition, which involved an
arbitrator being present in the room throughout the negotiation. The trust condition was
also varied across three conditions in a similar manner. There was a control condition as
well as a condition where the variable was being manipulated in either a high (individuals
had high trust for one another) or low (individuals had low trust for one another)
condition. Given the different degrees of the manipulation, the integrativeness of
outcomes across those conditions should also vary. The more real the power threat, the
more integrative negotiation outcomes should be. The higher the trust between the
negotiators, the more integrative the outcomes should be.

In addition to considering the power and trust variables in isolation, they were
considered together. When individuals negotiating are facing threats to their power, in
the form of possible arbitration, as well as dealing with issues of trust between the parties,
there are many different outcomes possible. As mentioned previously, individuals in low
trust conditions may become antagonistic, causing the entire negotiation to suffer. By

combining a low trust condition, which is likely marked by argumentative behavior, with

11

the threat of arbitration, which should cause negotiators to behave more responsibly, this
study is trying to create a degree of accountability in which the parties will respond to the
power threat and reduce emotional outbursts and return to the task at hand.

This reasoning and various literature, combined with additional thought in regards
to negotiation, arbitration, and trust have given birth to the following hypothesis that was
tested in this study.

Hypothesis: The higher the trust between negotiators and
the higher the threat to their power, the more integrative
their outcomes will be.

There is extensive literature regarding negotiation, power, and how trust relates to
both of those issues. The negotiation literature, combined with studies that focused on
integrative solutions, led to the research question, how do power and trust influence
negotiation situations? This study was a natural outgrowth of that question. After
reviewing the literature, it became obvious that each one individually had an impact on
integrative outcomes of negotiation situations, and further thought led to the hypothesis

of an interaction of the variables of power and trust impacting the degree to which

outcomes were integrative.

Chapter 3

Methods

Subjects

Participants were 207 traditional undergraduates at a large, mid-westem
university. They were separated into nine different conditions (see Table l for actual
distribution). They were recruited from an introductory course that consisted of majors
from across the university. On the average, subjects were white, unmarried 18-year-old

females with no previous experience in negotiation.

Table 1: Subject Distribution Across Cells

 

Control Threat Presence

 

 

 

Straight 14 22 22
High Trust 20 16 20
Low Trust 18 24 20

 

 

 

 

 

 

Procedures

Participants engaged in a buyer/seller negotiation exercise. Upon entering the
laboratory, subjects were assigned to different cells and different roles, either a buyer,
seller, or an arbitrator, which placed them in either a dyad or a triad. Subjects were
separated based upon their roles and were given a demographic questionnaire (see
Appendix A) to fill out along with a personality inventory which is not included as it was

not analyzed for this study. They were then instructed to role play a negotiation and were

12

13

told their assigned role. Based upon their role, they were given an informational packet
that detailed their role and the specifics of the exercise (see Appendix B). After everyone
had read this packet over, they were given a true/false quiz to verify their understanding
of the information contained in their packet as well as to verify that the manipulations of
trust and power were effective (see Appendix C for the manipulation check). Once
subjects had completed this form, a lab attendant went over the quiz with them to confirm
that they had answered all the questions correctly, indicating that they understood their
role in the experiment and that the manipulation was effective. If subjects answered
questions incorrectly, they had a discussion about why they were incorrect as well as
what the correct answer was and why.

Once all subjects had finished with the quiz, they were joined with their buyer or
seller counterpart and told to begin their negotiations. If subjects had questions, they
raised their hands and an attendant came and answered it. Once the group had finished
the negotiation exercise, they were brought a “Final Contract” to complete and sign (see
Appendix D). If the subjects failed to reach an agreement by the end of the time limit,
they were given the “Final Contract” and told to complete it in accordance with the
number of items they successfully agreed upon. The subjects were then given a
debriefing form and encouraged to ask questions (see Appendix B).

These procedures, along with all of the maniplations detailed, were done to
determine integrativeness in negotiation. This study measured integration by looking at
joint profit dollars at the end of the negotiation. Given the way the payoff schedules were
set up, any joint profit totalling over $4000 was considered to be integrative. Integrative

outcomes could range between $4000 and $5200. (See Table 3 for a breakdown of all

14

joint profits across conditions as well as the individual profits across conditions.)
Manipulations

In order to manipulate the independent variables of trust and power, participants
were given different information depending upon their cell assignment. Cells one, two,
and three all contained basic information about the negotiation, with no mention of any
previous interaction between the two companies the subjects were representing (see Table
2 for corresponding condition descriptions). This condition served as a control for the
trust variable. Cells four, five, and six contained data identical to that provided in cells
one, two, and three, but there was additional information detailing a positive past history
with their counterpart’s company. There was no concrete information given, but the
message conveyed was that there was a high degree of trust in the relationship due to
positive interactions in the past. This information created the high trust condition. Cells
seven, eight, and nine, contained just the opposite information as cells four, five, and six.
Again, there was no evidence given, but each negotiator was led to believe that in the past
interactions had not gone well. This bad history was designed to cause negotiators to feel
a lack of trust in the relationship, thereby creating the low trust condition. (See Appendix
F for the specific language associated with each cell.)

Cells one, four, and seven acted as a control condition for the power variable. In
each of these cells, participants were told that there was a time limit of twenty minutes
within which to reach a settlement; there was no mention of any consequences if they
were unable to reach an agreement within the twenty minutes. Cells two, five, and eight
made up the threat to power condition. In this condition, participants were told of the

twenty minute time limit and warned that if they were unable to reach an agreement

15

within that time frame an arbitrator would be brought in to make a binding decision for
them. Cells three, six, and nine made up the strongest power manipulation condition. In
this condition, an arbitrator was actually present throughout the negotiation. Participants
were told of the twenty minute time limit, and the arbitrator actually sat in the room
during the entire negotiation process to make the threat more real.

Table 2 - Condition Descriptions

 

Control Threat Presence

 

 

 

Straight 1 2 3
High Trust 4 5 6
Low Trust 7 8 9

 

 

 

 

 

 

Each exercise also contained some basic information about the buyer’s and
seller’s organizations designed to impart a feeling of some urgency to the participants.
They were made to understand that they needed to negotiate in good faith with each other
due to the continuous nature of the relationship between their organizations.
Additionally, they were given a minimum profit that they “must” obtain, and they were
made to understand that they could not choose not to negotiate. Both participants
received the same basic information. The differences between each of the exercises was
determined by the condition into which subjects fell.

In order to measure the dependent variable of integrative outcomes, each member
of the negotiation pair had a sheet of profit/price guidelines (see Appendix G). They
were also told their counterpart had their own sheet of guidelines containing different

information. This lack of information regarding profits/prices created a need for open

16

information exchange in order to achieve successful integrative bargaining.

Each guideline sheet detailed the profit achieved at any given price for each of the
three items under negotiation. Negotiators were each given their own guidelines and
instructed not to share, but were told they could speak of the information freely.
Negotiators couldn’t share guideline sheets because the payoff schedules shown there
were opposite for the buyer and seller. For example, on one appliance, big screen
televisions, the buyer made the maximum profit at price I and the seller made zero profit
on price 1. However, on lap top computers, the buyer made no profit at price A, whereas
the seller made the most profit on price A. This setup allowed for the determination of
integration, because the most profit would not be realized if the negotiators merely went
for the middle price/profit for each item. Instead, they must exchange information openly
and honestly, in other words, negotiate integratively, to discover that they can make a
higher profit alone, as well as jointly, by each sacrificing on one particular item.

For instance, if the negotiators did not exchange information frankly, the general
pattern to be expected is that the buyer would attempt to get the seller to agree to his or
her highest profit margin, and the seller would resist, as the buyer’s highest profit margin
is the seller’s lowest profit margin. The two negotiators would bargain back and forth
until they ended up somewhere in the middle on the item. This is the basic model for
distributive bargaining. This practice would be followed for each item, resulting in a
middling profit for each participant. However, if they exchange information, the key
principle for integrative bargaining, they will soon discover that if one sacrifices

completely on one item in return for his or her maximum profit on another item, and they

l7
split the third item, they will each receive a much higher profit than they would have

otherwise.

Chapter 4

Analysis/Results

The first hypothesis predicted was an interaction between power and trust
affecting the dependent variable of joint outcomes. For example, the effect of power
upon joint profit is dependent on the level of trust in the manipulation. The interaction
hypothesis was not supported by the data analysis. An analysis of variance for joint
profit with the interaction variable (trust by power) yielded an F -value of .419 (p-value of
.80) which was not significant. The mean profits for each of the nine conditions are

detailed below (see Table 3).

Table 3 - Mean Profits

 

 

 

 

 

 

 

 

Control Threat Presence

Straight $4,546 (joint) $4,418 (joint) $4,693 (joint)
$2,419 (buyer) $2,209 (buyer) $2,288 (buyer)

$2,127 (seller) $2,209 (seller) $2,406 (seller)

High Trust $4,160 (joint) $3,927 (joint) $4,380 (joint)
$2,065 (buyer) $2,023 (buyer) $2,095 (buyer)

$2,095 (seller) $1,905 (seller) $2,285 (seller)

Low Trust $4,217 (joint) $3,786 (joint) $3,850 (joint)
$1,906 (buyer) $1,764 (buyer) $1,755 (buyer)

$2,311 (seller) $2,012 (seller) $2,095 (seller)

 

 

When testing for main effects only, the ANOVA showed that in this model (see
Table 4) trust accounted for a statistically significant portion (p = .021) of the variance in

joint profit. Power did not have a significant effect on joint outcomes in this model.

18

Table 4 - AN OVA Table

19

 

 

 

 

 

 

 

 

 

 

 

 

 

Source of SS DF MS F p
Variation

Within+Residual 53216654 83 641 165
Power 1248604 2 624302 .97 .382
Trust 5211016 2 2605508 4.06 .021
(Model) 6187636 4 1546909 2.41 .055
(Total) 59404290 87 682808
R-Squared = .104

Given the lack of statistical support for the hypothesis when considering the
variables as categorical, they were then considered as continuous. For example, trust was
considered to have three different values on a scale of 0 to 2. Level 0 was the low trust
condition, level 1 was the control condition (straight negotiation), and level 2 was the
high trust condition. Power was considered in a similar fashion; level 0 was the control
condition, level 1 was the threat of arbitration, and level 2 was the arbitrator present
condition. Even with the re-organization of the data, there was no support for the

hypothesis of an interaction effect, nor were there significant main effects from a

regression analysis (see Table 5).

 

20

Table 5 - Regression for Continuous Variables

 

 

 

R Square .00652
Standard Error 833.2559]
DF SS MS
Regression 2 387480 193740
Residual 85 59016810 694315

 

 

 

 

 

F = .27904 p = .7624

 

 

 

Variable B Standardized Significance
Beta of t

Power -22 -.021 991 .8393

Trust -79 .077397 .4761

 

 

 

 

 

 

Considering there was a statistically significant effect for trust when considering it
as a categorical variable and not a statistically significant effect for trust when
considering it as continuous, the data were then merged into a dichotomous variable for
both trust and power. As there were obviously differences between trust conditions this
transformation was done to try and better understand those differences in the trust
treatment. As the regression didn’t show the differences to be due to levels of trust,
maybe the differences are between the control condition and the other two trust
conditions. Therefore, two dummy variables were created and called (I) “talked about
trust” (yes or no) and (2) “talked about a power threat” (yes or no). A second regression
was conducted using the dummy variables, and that model (see Table 6) revealed that
merely talking about trust reduced joint profits by an average of $464! Essentially, the
effect of trust on joint profit is a negative one, which is the opposite of what was

hypothesized.

21

Table 6 - Regression for Dichotomous Variables

 

 

 

R Square .07922
Standard Error 802.18886
DF SS MS
Regression 2 4706198 2353099
Residual 85 54698092 643507

 

 

 

 

 

 

F= 3.65668 p = .0300

 

 

 

Variable B Standardized Significance
Beta of t

Talked about -1 16 -.067647 .5181

Power

Talked about -464 -.269604 .0114

Trust

 

 

 

 

 

 

Other ANOVA analyses (for race, previous negotiation experience, and role, all
considered individually) turned up non-significant results. One test, however, did show
that females could expect on the average to receive lower joint profits than males.
Females score $145 less than males in joint profits, regardless of male/male,

female/female, or male/female teams.

Chapter 5

Discussion

There was no interaction effect when looking at power and trust in relation to joint
profit. A statistically significant main effect was revealed when power and trust were
merged into dummy variables of (I) “talked about” or (2) “didn’t talk about”. This again
was not what was hypothesized. Given the widespread differences between the results
and the hypothesis, further investigation was thought to be useful. For example, each
dyad considered solely in terms of the sex variable -- male/male, female/female, or mixed
sexes. There was no significant difference between these three conditions in regard to
joint profit. However, when tested with individual profit between males and females
regardless of dyad type or cell number, a correlation of .15 (p = .01) was found for sex
and individual profit. Across conditions, women scored lower individual profits than
men.

These findings are different than those reported in the literature. Generally, the
literature has shown that individuals have responded with an increase in concession
making and done so faster when faced with power threats. In this study, there appeared
to be no effect for the variable of power at all, not even when it was merged into a
dichotomous variable from a continuous one.

The most interesting outcome of this study is the finding that the mere mention of
trust, regardless of talking about it positively or negatively, significantly reduces joint
profit. This is not what was expected. One of the possible reasons that mentioning trust

seems to reduce trust in the relationship is the suspicion that tends to accompany a

22

23
declaration of trust. Basically the idea is that if they trust each other, it doesn’t need to be

discussed; simply stating that there is a high trust level may have put subjects on their
guard. Additionally, some individuals don’t bother to think about where the trust levels
are, they simply get to work negotiating. If trust is mentioned to these individuals it may
prove to be distracting; instead of simply assuming an acceptable level of trust, they
begin to thing about trust and devote themselves to figuring out the trust levels and
monitoring the other individual rather than thinking about maximizing their profits.

The phenomenon of a discussion of trust, even in a positive manner, causing
problems with trust in a relationship is not limited to this study. It is frequently found in
interpersonal relationships that calling attention to the relationship itself tends to cause
problems. If the relationship is going fine there doesn’t need to be any discussion of that
relationship. Also calling attention the relationship wakes people up. What they took for
granted to be working fine they are now questioning, even if the discussion that woke
them was strictly positive. Another reason that talking about trust, or any other aspect of a
relationship, may cause problems is that focusing on the relationship may distract and
confuse people. Getting wrapped up in talking about trust in the relationship takes away
from the business of actually having the relationship!

These differences between the current study and the current literature lead to
questions regarding the study. Clearly a major weakness of the study is that the subjects
were not involved enough for the manipulation to be effective. When subjects were
given the true/false quiz designed to verify the manipulation check, there were several
instances when their answers were wrong and they had to be corrected. Specifically this

ofien happened with the question, “If my partner and I are unable to reach an agreement

24

within 20 minutes, we will no longer have the power to control our own profits”. If
subjects did not correctly answer this question, it is likely that the power manipulation
was not strong enough to make the situation real for them.

Another weakness of this study is the sample size. There were 207 subjects that
participated, but that was not the total number used in data analysis. Of those 207, 33
were excluded because they played the role of an arbitrator; the arbitrator did not actively
participate in the study other than to create the power threat in a more real manner, so
there was no data other than basic demographic collected about them. Further reduction
of sample size occurred due to the fact that the variable of interest, joint profit, was
doubled as each member of a negotiating dyad had the same value. For the sake of
meaningful data analysis, this number had to be reduced by half, leaving the actual
sample size for data analysis at 88 subjects (dyads).

A third weakness of the study was the homogeneity of the sample. Subjects were
culled from an introductory class that spans many majors, but there was a very small
range of ages between the subjects. The same holds true for race, marital status, and sex;
there was very little variance between subjects with regard to these variables.

One of the possible reasons for the data to be so different than that reported in the
literature is a confounding variable, familiarity. Subjects often knew one another as
friends or room mates, or at least were able to identify each other by sight. This
familiarity could be especially problematic when considering the arbitrator present
condition for the power variable; it is difficult for the arbitrator to maintain credibility

when he or she is know to be a peer of the negotiators.

25

Given that the data resulted in significant findings with respect to trust, even with
such a homogenous group of subjects, points to some strengths in the design of the study.
The outcome variable was created with an opportunity for a great deal of variance; joint
profit ranged from $1400 to $5200. By providing a dependent variable with potential for
variance, the power of the statistical tests is increased, which in turn strengthens the
design of the study.

Another strength of the study was the distribution of subjects. There was a
relatively small sample size, but the subjects were fairly evenly distributed across all nine
cells, allowing for variance to show through in the data. Dyads and triads ranged from a
minimum of 7 in cell 1, the control condition for both variables, to a maximum of 12, in
cell 8.

These results, including the strengths and weaknesses detailed, led to some
different avenues for future research. First, replicating this study and including an exit
interview that tries to get at why the mere mention of trust seems to call an individual’s
trustworthiness into question would prove interesting. Second, analyzing the transcripts
that were obtained during these negotiations could offer additional insight. That would
allow for more specific targeting of the idea of information sharing as it applies to
integrative bargaining. For instance, in this study, outcomes alone were used to
determine if individuals had shared information. The transcripts from this experiment
could be analyzed for key indicators of information exchange. Those findings could then
be compared against the dollar outcomes of this study, to determine if outcomes are good

indicators of integration.

APPENDIX A

APPENDIX A

Demographic Questionnaires

Individual ID #

 

PLEASE ANSWER THE FOLLOWING QUESTIONS AS HONESTLY AS
POSSIBLE. YOUR ANSWERS WILL BE KEPT STRICTLY CONFIDENTIAL.
THANK YOU FOR YOUR TIME AND COOPERATION.

1. What is your age?
For the following questions, place an “x” in the space indicating your answer.

2. Please indicate your sex.
Male
Female

3. Please indicate your class standing.
Freshman
Sophomore
Junior
Senior
Other, please explain

 

4. Please indicate your marital status.
Married
Single
Other (please explain)

 

5. What is your racial/ancestral background? (Check only one)
White
Black/African American
Asian/Pacific Islander
American Indian/Eskimo/Aluet
Hispanic
Arab
Other

 

26

6. Have you ever taken or audited a class that related to negotiation in any way? (i.e.
discussed negotiation styles, role played a negotiation. . .etc.)
Yes
No
If yes, identify the class and explain the negotiation process you participated in.

 

 

 

7. Have you ever participated in a negotiation due to the nature of your career?
Yes
No

If yes, please explain

 

 

 

 

8. Have you ever participated in a negotiation for any other reason? (i.e. court, union,
divorce. . .etc.)
Yes
No
If yes, please explain the circumstances for the negotiation.

 

 

 

27

At times, you may have incompatibilities, disagreements, differences, or conflict with
your peers. Rank cab of the following statements, by circling a number on the scale
provided after each statement, to indicate how you handle conflict with your peers. Try
to recall as many recent conflict situations as possible in ranking these statements.

Scale: 5= Strongly Agree, 4= Agree, 3= Undecided, 2= Disagree, 1 = Strongly Disagree

1. I try to investigate an issue with my peers to find a solution acceptable to us ......................... 5 4 3 2 1
2. I generally try to satisfy the needs of my peers ......................................................................... 5 4 3 2 l
3. I attempt to avoid being “put on the spot” and try to keep my conflict with my peers to

myself ........................................................................................................................................ 5 4 3 2 1
4. I try to integrate my ideas with those of my peers to come up with a decision jointly ............. 5 4 3 2 l
5. I try to work out a compromise that will give both me and my peers some of what we want..5 4 3 2 1
6. I try to work with my peers to find solutions to a problem which satisfy our expectations ..... 5 4 3 2 l
7. I usually avoid open discussions of my differences with my peers .......................................... 5 4 3 2 1
8. I exert pressure on my peer so that a decision is made in my favor .......................................... 5 4 3 2 l
9. I try to find a middle course to resolve an impasse ................................................................... 5 4 3 2 1
10. I use my influence to get my ideas accepted ............................................................................. 5 4 3 2 1
11. I usy my authority to make a decision in my favor ................................................................... 5 4 3 2 l
12. I usually accommodate the wishes of my peers ........................................................................ 5 4 3 2 1
13. I give in to the wishes of my peers ............................................................................................ 5 4 3 2 l
14. I barbain with my peer so that a middle ground can be reached ............................................... 5 4 3 2 1
15. I exchange accurate information with my peers to solve a problem together ........................... 5 4 3 2 1
16. I sometimes bend over backwards to accommodate the desires of my peer ............................. 5 4 3 2 l
17. I usually allow concessions to my peers .................................................................................... 5 4 3 2 l
18. I am firm in presenting the merits of my position ..................................................................... 5 4 3 2 1
19. I sometimes take a moderate position so that a compromise can be reached ........................... 5 4 3 2 1
20. I usually propose a middle ground for breaking deadlocks ....................................................... 5 4 3 2 l
21. I negotiate with my peers so that a compromise can be reached .............................................. 5 4 3 2 1
22. I try to stay away from disagreement with my peer .................................................................. 5 4 3 2 l
23. I avoid an encounter with my peers ........................................................................................... 5 4 3 2 1
24. I use my expertise to make a decision in my favor ................................................................... 5 4 3 2 1
25. I often go along with the suggestions of my peers .................................................................... 5 4 3 2 1
26. I use “give and take” so that a compromise can be made ......................................................... 5 4 3 2 l
27. I am generally firm in pursuing my side of the issue ................................................................ 5 4 3 2 l
28. I try to bring all our concerns out in the open so that the issues can be resolved in the best

possible way ............................................................................................................................... 5 4 3 2 l
29. I collaborate with my peers to come up with decisions acceptable to us .................................. 5 4 3 2 l
30. I try to satisfy the expectations of my peers .............................................................................. 5 4 3 2 l
31. I sometimes use my power to win a competitive situation ........................................................ 5 4 3 2 1
32. I try to keep my disagreement with my peers to myself in order to avoid hard feelings .......... 5 4 3 2 l
33. I try to avoid unpleasant exchanges with my peers ................................................................... 5 4 3 2 l
34. I keep my disagreement with my peers to myself so as not to disrupt our relationship ........... 5 4 3 2 l
35. I try to work with my peers for a proper understanding of a problem ...................................... 5 4 3 2 l

28

APPENDIX B

APPENDIX B

Negotiation Instructions

Negotiation Instructions: Buyers

Imagine that you work as a purchasing representative for Sam’s Warehouse Club,
the wholesale chain owned by the Wal-mart corporation. You have worked at Sam’s
Club for the past five years. As part of your job, you negotiate with manufacturers of
electronics concerning how much your stores will pay for their products. In this
simulation you will be negotiating with a representative from General Electric. You will
be negotiating about prices for three types of electronics: big-screen television sets,
personal copying machines, and lap-top personal computers.

Attached to these instructions is your profit sheet. This sheet lists nine (9)
different prices (marked “A” through “1”) at which you could buy each of the three
electronics. As you can see, you earn greater profits for Sam’s Club if you can convince
your counterpart to sell each item for a lower price. Consider the last item, lap-top
computers (see Column 3). If you can convince General Electric to sell for price “I”, then
your company (Sam’s Club) will earn $2000 profit on every computer. If you and your
counterpart settle on price “F”, then Sam’s Club earns $1250 per computer. If you and
your counterpart settle on “A”, then your company would be buying computers at full
price and earn $0 profit per computer.

Remember, prices are listed as letters, such as “A”, “C”, or “F”. Your profits are
listed in dollar amounts, such as “$800”, “$600”, or “$400”.

Your counterpart from General Electric also has a profit sheet which lists the
same three items (big-screen TV sets, personal copying machines, and lap-top computers)
as well as the same nine prices for each item (i.e., “A” through “1”). However, your
counterpart does NOT know how much profit you will receive for each price. Similarly,
you do not know how much profit your counterpart will receive for each price.

At the end of the negotiation, your own TOTAL PROFIT is determined by your
settlement on all three items. For example, if you and your counterpart agree on price
“E” for big-screen TV sets ($400), price “B” for copying machines ($150), and price “G”
for lap-top computers ($1500), then your total profit would be $400 + $150 + $1,500 =
$2,050. As you can see from your profit sheet, the most profitable settlement for Sam’s
Club is “I”, “I”, and “I” for all three items, in which case your total profit is $800 +
$1,200 + $2,000 = $4,000. The least profitable settlement for Sam’s Club is “A”, “A”,
and “A”, for all three items, in which case your total profit is $0.

29

Please remember that your primary objective is to maximize your
potential profit. After talking with your supervisor at Sam’s Club, you believe IT IS
CRITICAL THAT YOUR TOTAL PROFITS AT THE END OF THE NEGOTIATION BE
ATLEAST $2,200. You may use whatever strategy you feel is appropriate to achieve this
profit level.

Information about General Electric:
Although you wish to maximize total profit, you also have incentives to reach an
agreement with your counterpart from General Electric. General Electric is a respected
manufacturer of electronics because they make quality products. You have carried their
products for years, and customers really like them. Your company has an opportunity to
increase its overall volume of sales substantially by offering electronics made by General
Electric. It is important that you reach an agreement with your counterpart as soon as
possible so you can keep their three items well stocked in your stores.

You have 20 minutes to try and negotiate an agreement. You should start by
making an opening offer about the price of one or more items (e. g., “How about price “F”
for big-screen TVs?”). Then you can approach the task in any fashion that you choose.
YOU MAY SHARE ANY INF ORMA TION YOU WISH WITH YOUR COUNT ERPART
BUT YOU MAY NOT TRADE WORK SHEETS.

Any questions before we start?

Negotiation Instructions: Sellers

Imagine that you work as a purchasing representative for the electronics division
of General Electric. You have worked at GE for the past five years. As part of your job,
you negotiate with purchasing representative for various retail stores concerning how
much your they will pay for GE’s products. In this simulation you will be negotiating
with a representative from Sam’s Club, the wholesale chain owned by the Wal-mart
corporation. You will be negotiating about prices for three types of electronics: big-
screen television sets, personal copying machines, and lap-top personal computers.

Attached to these instructions is your profit sheet. This sheet lists nine (9)
different prices (marked “A” through “1”) at which you could sell each of the three
electronics. For each appliance, “A” is the most expensive price while “I” is the least
expensive price. As you can see, you earn greater profits for General Electric if you can
convince your counterpart to pay a higher price for each item. Consider the first item,
big-screen television sets (see Column 3). If you can convince Sam’s Club to pay price
“A”, then your company (GE) earns $2000 profit on every TV. If you and your
counterpart settle on price “D”, then General Electric earns $1250 per set. If you and
your counterpart settle on “I”, then your company would be selling big-screen TV’s at
cost and earn $0 profit per TV set.

30

Remember, prices are listed as letters, such as “A”, “C”, or “F”. Your profits are
listed in dollar amounts, such as “$800”, “$600”, or “$400”.

Your counterpart from Sam’s Club also has a profit sheet which lists the same
three items (big-screen TV sets, personal copying machines, and lap-top computers) as
well as the same nine prices for each item (i.e., “A” through “1”). However, your
counterpart does NOT know how much profit you will receive for each price. Similarly,
you do not know how much profit your counterpart will receive for each price.

At the end of the negotiation, your own TOTAL PROFIT is determined by your
settlement on all three items. For example, if you and your counterpart agree on price
“E” for big-screen TV sets ($1,00), price “G” for copying machines ($300), and price “B”
for lap-top computers ($700), then your total profit would be $1000 + $300 + $700 =
$2,000. As you can see from your profit sheet, the most profitable settlement for General
Electric is “A”, “A”, and “A” for all three items, in which case your total profit is $2,000
+ $1,200 + $800 = $4,000. The least profitable settlement for General Electric is “I”, “I”,
and “I”, for all three items, in which case your total profit is $0.

Please remember that your primary objective is to maximize your
potential profit. Afier talking with your supervisor at GE, you believe IT IS CRITICAL
THAT YOUR TOTAL PROFITS AT THE END OF THE NEGOTIATION BE ATLEAST
$2,200. You may use whatever strategy you feel is appropriate to achieve this profit
level.

Information about Sam’s Club:
Although you wish to maximize total profit, you also have incentives to reach an
agreement with your counterpart from Sam’s Club. Sam’s Club is a respected retailer of
electronics, the company has stores located throughout Michigan, and thousands of
customers shop daily in each store. Sam’s Club has carried your products for years, and
customers really like them. Your company has an opportunity to increase its overall
volume of sales substantially by continuing to have its electronics sold at Sam’s Club. It
is important that you reach an agreement with your counterpart as soon as possible so you
can keep all three items well stocked in their stores.

You have 20 minutes to try and negotiate an agreement. You should start by
making an opening offer about the price of one or more items (e.g., “How about price “F”
for big-screen TVs?”). Then you can approach the task in any fashion that you choose.
YOU MAY SHARE ANY INF ORMA TION YOU WISH WITH YOUR COUNT ERPART
BUT YOU MAY NOT TRADE WORK SHEETS.

Any questions before we start?

31

 

APPENDIX C

APPENDIX C

 

Manipulation Check
Individual ID #
Test Your Understanding
Circle “T” for TRUE and “F ” for FALSE
1. I can control my profits by negotiating with my partner. T F

2. There are risks involved in telling my partner that I feel either positive or negative regard about past
experiences with him/her . T F

3. If my partner and l are unable to reach an agreement within 20 minutes, we will no longer have the
power to control our own profits. T F

4. l have information about my partner that I can choose to keep to myself or tell him/her.

T F
5. There are different prices for each of the products for which wer are negotiating. T F
6. Prices are listed as letters. T F
7. Profits are listed as dollar amounts. T F
8. My partner knows what my profit is for each item. T F
9. My primary objective is to maximize my potential profit. T F
10. My profits are the same across all three items at any static price, such as “E”. T F
l 1. My total profit is determined by adding the profits from each item together. T F

12. 1 want to reach an agreement with my partner because I want to maintain a relationship with him/her.

T F
13. My profit for copy machines at price “D” is $450. T F
14. My profit for TV’s at price “D” is $450. T F
15. My partner and 1 can look at one another’s worksheets. T F

32

APPENDIX D

APPENDIX D

 

 

 

 

 

Final Contract
#
FINAL CONTRACT
Big-Screen Television _ (Indicate letter of price category)
Personal Copying Machine _ (Indicate letter of price category)
Lap-Top Personal Computer _ (Indicate letter of price category)
Buyer’s Profit Summary

Big-Screen Television $_ (Indicate profit amount in dollars)
Personal Copying Maching +

Lap-Top Personal Computer +

 

(Compute total profit only if you have reached an agreement on all three items.)

 

 

TOTAL PROFIT $ (Indicate profit amount in dollars)
Seller’s Profit Summagy
Big-Screen Television $ (Indicate profit amount in dollars)
Personal Copying Maching +
Lap-Top Personal Computer +

 

(Compute total profit only if you have reached an agreement on all three items.)
TOTAL PROFIT $ (Indicate profit amount in dollars)

Signed: Sam’s Club Representative

General Electric Representative

 

33

APPENDIX E

APPENDIX E

Debriefing

Debriefing

This study was designed to test the affects of an arbitrator’s presence on
buyer/seller negotiation. The variable of trust was manipulated, as well as the variable of
arbitrator presence. Subjects were given information about how a previous negotiation
with the same buyer/seller had gone. This information was either positive, in the high
trust condition, or negative, in the low trust condition. The information was nothing
concrete, just a feeling the subject had aobut his/her counterpart. The idea behind
manipulating trust levels was to determine how trust affected the cooperation level in
negotiation. For instance, were people in the high trust condition more willing to
cooperate in the negotiation than people in the low trust condition. There was another
variable, arbitrator presence. Arbitrator presence was manipulated to determine the
effects of a threatened loss of power on cooperation. For instance, were people more
willing to cooperate when they were threatened with an arbitrator, who would make
decisions for them. Finally, the two variables were looked at in relation to each other.
How did trust level, along with arbitrator presence, affect levels of cooperation between
the negotiators?

34

APPENDIX F

APPENDIX F

Manipulations

Arbitrator Thrth (Power condition) - Buyer/ Seller

If you fail to reach an agreement within 20 minutes, an arbitrator or judge will
come in at the end of your session, review your final oflers, and make any price decision
he/she feels is appropriate for each item. By determining the purchase prices for you, the
arbitrator will have the power to regulate your company’s total profit.

Arbitrator Presence (Power condition) - Buyer

An arbitrator will be present during your negotiations with General Electric. If
you fail to reach an agreement within 20 minutes, the arbitrator or judge will review your
final oflers, and make any price decision he/she feels is appropriate for each item. By
determining the purchase prices for you, the arbitrator will have the power to regulate
your company ’s total profit.

Arbitrator Presence (Power condition) - Seller

An arbitrator will be present during your negotiations with Sam ’s Club. If you
fail to reach an agreement within 20 minutes, the arbitrator or judge will review your
final oflers, and make any price decision he/she feels is appropriate for each item. By
determining the purchase prices for you, the arbitrator will have the power to regulate
your company’s total profit.

High Tru_st Condition. - Buyer

Information about the Seller:
You worked with this seller last year, and this person has always followed through
properly in every detail. The contracts were exactly what you agreed to in the
negotiations. Although you do not have any proof, you feel this person is honest in
negotiating prices. In fact, you believe the seller tries to give fair prices to all stores,
including Sam’s Club largest competitor, Pace. Because you are confident the seller will
negotiate the selling prices in good faith, your trust level with this person is fairly high.

Although this information about the seller is very positive, there are risks involved
in disclosing how you feel about his/her pricing. By revealing that you believe Pace gets
a similar deal from the seller, you risk creating the impression that you initially did not
trust the seller and felt the need to check up on his/her pricing. On the other hand, there
may be some risk in no; disclosing your positive regard for the seller’s trustworthiness.
For example, you may pass up an opportunity to build a stronger relationship with the
seller. Both disclosing and withholding your feelings may or may not alter the

35

negotiation process. It is up to you to determine which course to take.

High Trui Condition - Seller

Information about the Buyer:

You worked with this buyer last year, and this person has always followed through
properly in every detail. The payments received from Sam’s Club were exactly what you
agreed to in the negotiations. Although you do not have any proof, you feel this person is
honest in negotiating prices. In fact, you believe the buyer is willing to pay fair market
values and does not try to start price wars with its competitors. Because you are confident
the buyer will negotiate the purchasing prices in good faith, your trust level with this
person is fairly high.

Although this information about the buyer is very positive, there are risks
involved in disclosing how you feel about his/her pricing. By revealing that you believe
the buyer has a history of avoiding price wars with other stores, you risk creating the
impression that you initially did not trust the buyer and felt the need to check up on
his/her negotiating style. On the other hand, there may be some risk in & disclosing
your positive regard for the buyer’s trustworthiness. For example, you may pass up an
opportunity to build a stronger relationship with the buyer. Both disclosing and
withholding your feelings may or may not alter the negotiation process. It is up to you to
determine which course to take.

Low Trust Condition - Buyer

Information about the Seller:

You worked with this seller last year, and this person has always followed through
properly in every detail. The contracts were exactly what you agreed to in the
negotiations. However, although you do not have any proof, you feel this person is less
than honest in negotiating prices. In fact, you feel the seller may give better prices to
other stores, including Sam’s Club largest competitor, Pace. Because you are m
confident the seller will negotiate the selling prices in good faith, your trust level with
this person is fairly low. This information about the seller is very negative.

There are risks involved in disclosing how you feel about his/her pricing. The
seller may become defensive and refuse to cooperate with you if you mention that you
think Pace gets the same goods for lower prices. On the other hand, there may be some
risk in pg disclosing your negative regard for the seller’s trustworthiness. You may lose
some leverage over the seller to give you the same deal as other stores get. Therefore,
both disclosing and withholding your feelings may or may not alter the negotiation
process. It is up to you to determine which course to take.

36

Low Tru_st Condition - Seller

Information about the Buyer:

You worked with this buyer last year, and this person has always followed through
properly in every detail. The payments received from Sam’s Club were exactly what you
agreed to in the negotiations. However, although you do not have any proof, you feel this
person is less than honest in negotiating prices. In fact, you believe the buyer is
unwilling to pay fair market values. You believe the buyer has a reputation for starting
price wars with other stores. Because you are n_ot confident the buyer will negotiate the
purchasing prices in good faith, your trust level with this person is fairly low. This
information about the buyer is very negative.

There are risks involved in disclosing how you feel about his/her negotiating
style. The buyer may become defensive and refuse to cooperate with you if you mention
that you think he/she has a history of negotiating for prices that are below fair market
values. On the other hand, there may be some risk in pa disclosing your negative regard
for the buyer’s trustworthiness. You may pass some leverage over the buyer to get
him/her to pay the prices that other stores are willing to pay. Therefore, both disclosing
and withholding your feelings may or may not alter the negotiation process. It is up to
you to determine which course to take.

37

APPENDIX G

APPENDIX G

Payoff Schedules

Profit Sheet for Sam’s Warehouse Club (Buyer)

Big-Screen TV Sets Personal Copying Machines Lap-Top Personal Computers

 

 

 

Price Your Profit Price Your Profit Price Your Profit
A $000 A $000 A $000

B $100 B $150 B $250

C $200 C $300 C $500

D $300 D $450 D $750

E $400 E $600 E $1000

F $500 F $750 F $1250

G $600 G $900 G $1500

H $700 H $1050 H $1750

I $800 1 $1200 I $2000

Profit Sheet for General Electric Club (Seller)

Big-Screen TV Sets Personal Copying Machines Lap-Top Personal Computers

 

 

 

Price Your Profit Price Your Profit Price Your Profit
A $2000 A $1200 A $800
B $1750 B $1050 B $700
C $1500 C $900 C $600
D $1250 D $750 D $500
E $1000 E $600 E $400
F $750 F $450 F $300
G $500 G $300 G $200
H $250 H $150 H $100
I $000 1 $000 1 $000

38

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