MBA Negotiation Course Guide Template

Negotiation Course Guide: [Course name and term]

A course guide for the negotiation course found in most leading MBA programmes, either as a core module or as one of the most popular electives. It covers what the course is for, the competencies it builds, a 12-session roadmap with original role-play exercises, a key concepts table, an original mini-case with a teaching note, the way negotiation assignments are usually graded, an exam and role-play preparation plan, common struggles and a self-test. It is for MBA students before and during the course, and for managers who want the course in compact form. Source basis: the primary works of the field (Walton and McKersie 1965; Fisher and Ury 1981; Raiffa 1982; Lax and Sebenius 1986; Galinsky and Mussweiler 2001; Leonardelli et al. 2019) and the standard textbooks named as further reading, written up in original words. The role-plays, the mini-case and every number are original and fictional, and every number was computed in Python. Replace every [bracketed] value and every row marked Example.

Document control

Contents

• What the course is for
• Prerequisites
• Core ideas in brief
• Session roadmap
• Role-play exercise briefs
• Key concepts table
• Mini-case: the membrane supply contract
• Typical assignments and grading
• Exam and role-play preparation plan
• Common struggles
• Self-test questions
• My notes and next steps
• Sources and further reading
• Answer key
• Teaching note: the membrane supply contract
• Revision history
• Standard and licence note

What the course is for

A negotiation course teaches you to reach better agreements, or to walk away from bad ones, when you depend on someone whose interests differ from yours. It is a skills course built on decision analysis and social psychology. Most sessions follow the same loop: you prepare a role-play from confidential instructions, negotiate with classmates, see the anonymised results of the whole class, and debrief what drove the spread of outcomes. The spread is the lesson. Pairs given identical instructions routinely reach outcomes that differ by a large share of the available value, and the difference comes from preparation, the first offer, the questions asked and the way information was shared.

The course builds these competencies (mapped to the competency list used for the MBA library):

By the end of the course you should be able to: prepare any negotiation on one page; compute your reservation value from your BATNA and estimate the counterpart's; make and defend a first offer; find trades that create value across several issues; manage a multi-party process; recognise and respond to hardball tactics without using unethical ones; choose between negotiation, mediation, arbitration and litigation for a dispute; and learn systematically from each negotiation through a written debrief.

Prerequisites

No formal prerequisite is usual. The course does draw on:

• Expected value and simple decision trees for uncertain BATNAs (a lawsuit, a job offer that may fall through). See mba/mba-decision-trees-card and mba/pre-mba-quant-refresher.
• Present value for payment terms and multi-year deals. See mba/mba-npv-irr-card and mba/pre-mba-finance-primer.
• Basic game theory (dominant strategies, the prisoner's dilemma, credible commitments). See mba/mba-game-theory-card and mba/pre-mba-economics-primer.
• Pricing and willingness to pay for buyer and seller reservation prices. See mba/mba-pricing-card.
• Spreadsheet skill for scoring systems: weights, lookups and sums. See mba/pre-mba-excel-modeling-drills.

Core ideas in brief

Distributive and integrative bargaining. Walton and McKersie (1965) separated two processes that run in almost every negotiation. Distributive bargaining divides a fixed amount: each unit of price one side gains the other loses. Integrative bargaining enlarges what is available by finding trades where the parties value issues differently. Real negotiations mix both, which creates the tension Lax and Sebenius (1986) called the negotiator's dilemma: the openness that creates value also exposes you to having it claimed.

Interests, positions and principled negotiation. Fisher and Ury (1981) argued for separating the people from the problem, focusing on interests rather than positions, inventing options for mutual gain and insisting on objective criteria. A position is what someone says they want ("a price of 12"); an interest is why ("we must fill the line in the slow season"). Interests are where the value-creating trades are found.

BATNA, reservation price and ZOPA. Your BATNA is your best alternative to a negotiated agreement (Fisher and Ury 1981): what you will actually do if this deal fails. Your reservation price (or reservation value) is the worst deal you would accept, and it follows from your BATNA once you convert the BATNA into the terms of this deal. Raiffa (1982) gave the analytic form: for a single issue, the zone of possible agreement (ZOPA) is the range between the seller's reservation price and the buyer's reservation price.

Anchoring and first offers. Anchoring (Tversky and Kahneman 1974) means estimates are pulled toward an initial number. Galinsky and Mussweiler (2001) found that in negotiation the party who makes the first offer tends to obtain a better outcome, and that the effect weakens when the receiver focuses on the offerer's alternatives or on their own target. The practical rule: when you know the ZOPA reasonably well, open ambitiously but with a justification; when you know little, ask questions first.

Multi-issue trades, logrolling and scoring systems. When parties weight issues differently, conceding on the issue you value less in exchange for the one you value more raises both parties' totals (logrolling; Froman and Cohen 1970 compared it with compromise). A scoring system turns every issue into points so packages can be compared. Packages on the Pareto frontier cannot be improved for one side without hurting the other. Raiffa (1985) proposed the post-settlement settlement: after agreeing, look together for a package both prefer.

MESOs. Multiple equivalent simultaneous offers are two or three packages of equal value to you, presented at once. Leonardelli et al. (2019) report that MESOs can improve both the economic outcome and the counterpart's satisfaction, and the counterpart's choice reveals their priorities.

Coalitions and multi-party negotiation. With three or more parties, the question becomes who agrees with whom first. Sequencing, blocking coalitions and the risk of being left out dominate. Lax and Sebenius (2006) treat setting up the right table (parties, sequence, process) as a dimension of negotiation in its own right.

Culture. Cultures differ in how directly information is shared, how offers are used and how trust is built (Brett 2001; Hall 1976 on high- and low-context communication). Treat national culture as a prior to update, not as a script for the person in front of you.

Ethics. Lewicki and Robinson (1998) found that negotiators sort tactics into a range from generally acceptable (inflated opening offers) to clearly unacceptable (misrepresenting facts, false promises). Carr (1968) argued that business bluffing follows game rules different from private life; most instructors use that paper to provoke the debate, not to settle it.

Dispute resolution. Ury, Brett and Goldberg (1988) distinguish three approaches to disputes: reconciling interests, determining who is right, and determining who is more powerful. Interest-based approaches usually cost less and preserve relationships; rights (courts, arbitration) and power (strikes, threats) are fallbacks that also shape the BATNA of the interest-based talks.

Session roadmap

Role-play exercise briefs

Each brief gives the shared facts and the private facts for each side. The observer keeps the private facts sealed until the debrief.

RP-01 The used camper van (single issue, 20 minutes). Shared: a 2019 camper van, 84,000 km, listed at USD 31,500. Seller private: a dealer has offered USD 26,000 cash, valid for three days; the seller moves abroad in a week. Buyer private: an equivalent van from a dealer costs USD 30,800 with a warranty worth about USD 1,000 to the buyer. Learning point: the ZOPA is USD 26,000 to USD 29,800 once the warranty is priced in, and the first offer matters.

RP-02 Studio lease renewal (single issue plus one term, 30 minutes). Shared: a photography studio's five-year lease ends in three months. Tenant private: moving costs about USD 18,000 and a comparable studio rents for USD 4,200 a month. Landlord private: the unit would take an expected four months to re-let at USD 4,000 a month, with USD 6,000 of agent fees. Learning point: converting a BATNA into monthly rent, including one-off costs spread over the term.

RP-03 Freelance analytics contract (price and scope, 30 minutes). A data analyst quotes a three-month dashboard project to a mid-size retailer. The analyst values a public case study highly; the retailer cares little about publicity but a lot about a fixed delivery date. Learning point: anchors, counter-anchors and the trade between price and non-price terms.

RP-04 Cafeteria supplier renewal (interests, 40 minutes). Tallow Creek Medical Center renews its food-service contract. The hospital's private interests: patient-satisfaction scores, night-shift staff meals and a dietary audit. The supplier's private interests: a reference site for a new healthcare line and fewer small deliveries. Learning point: positions on price hide interests that can be met cheaply.

RP-05 Corvane distribution deal (five issues, 60 minutes). Corvane Robotics negotiates with a regional distributor on margin, exclusivity, territory, training days and payment terms, each with a confidential scoring table. Learning point: the class results show which pairs reached the Pareto frontier and which split the difference on every issue.

RP-06 Northfield store lease portfolio (team, 75 minutes). Two teams of three negotiate the renewal of four store leases at once. Each team has members with conflicting internal priorities. Learning point: internal alignment before external negotiation; who speaks, who calculates, who observes.

RP-07 Four-party regional trail-fund agreement (coalitions, 75 minutes). Two outdoor brands, a town council and a conservation trust divide funding and naming rights for a trail network. Any three can form an agreement; the fourth gets its BATNA. Learning point: sequencing and the value of being needed by every coalition.

RP-08 Joint venture terms across two business cultures (60 minutes). Roles carry different norms for direct questions, use of first offers and the pace of trust building. Learning point: adapting how information is exchanged without abandoning your preparation.

RP-09 Warranty dispute with mediator (60 minutes). A small retailer and a manufacturer dispute a batch of faulty headlamps. A third student mediates. Learning point: moving from rights ("the contract says") to interests (the retailer's season, the manufacturer's brand), and the effect of each side's litigation BATNA.

Ethics scenarios E1 to E6 (session 10). Rate each tactic from 1 (clearly acceptable) to 5 (clearly unacceptable) and say why: E1, an opening offer far above your target; E2, saying "that is my final offer" when it is not; E3, claiming a competing offer you do not have; E4, not volunteering a known defect the buyer did not ask about; E5, promising future business you have no authority to promise; E6, asking a counterpart's former colleague for their reservation price.

Key concepts table

Mini-case: the membrane supply contract

Situation. Northfield Outdoor Co. sells its own-brand rain jackets through stores and online. The waterproof membrane fabric in those jackets has come from a single mill that announced it will close its membrane line at the end of the season. Priya Raman, Northfield's sourcing director, has six weeks to sign a three-year supply agreement for about 400,000 metres a year.

Two suppliers are qualified to quote. Supplier B, a large mill overseas, has quoted USD 13.20 a metre with freight and duty adding about USD 0.40 a metre, payment at 60 days. Its fabric would need requalification (lab tests and field wear trials) costing about USD 180,000, and its 16-week lead time, against 6 weeks for a nearby mill, would force Northfield to hold roughly ten extra weeks of fabric as safety stock. Northfield's finance team charges inventory at 20% a year to cover capital, storage and obsolescence.

The nearby option is Supplier A, a family-owned mill 300 km away whose membrane is already approved in Northfield's lab. Supplier A's commercial director, Tomasz Wierzbicki, has asked for USD 14.10 a metre at 30-day payment terms and has mentioned that the mill has spare finishing capacity "for the right partner". Industry contacts tell Priya that Supplier A's variable cost is close to USD 9.80 a metre, that a dedicated finishing set-up for Northfield's colourways would cost Supplier A about USD 600,000, and that spot buyers pay around USD 12.00 a metre but only fill about three quarters of the capacity Supplier A could sell to them.

Priya's team has also identified three issues beyond price. Supplier A is financed by bank lines at about 14% a year and values faster payment; Northfield's cost of capital is about 8%. Supplier A would like a volume commitment so it can plan its line; Northfield's demand planners think a commitment to 90% of forecast carries a small expected cost. Northfield's brand team wants exclusivity on its signature "storm teal" colourway, which Supplier A sells in small volumes to other buyers.

Priya's first instinct is to say nothing about Supplier B and to counter at USD 12.00. Her deputy suggests opening with three packages instead. The CFO wants a recommendation on the opening move, the walk-away price and the package to aim for.

Exhibit 1. Northfield's BATNA (Supplier B), per the sourcing team.

Exhibit 2. Supplier A, as estimated by Northfield.

Exhibit 3. Non-price issues (values confidential to each side, revealed in class after the role-play).

Discussion questions.

1. What is Northfield's reservation price per metre? Show each component and its Excel formula.
2. Estimate Supplier A's reservation price. Which estimate is least reliable, and how would you test it at the table?
3. What is the ZOPA on price alone, per metre and over the contract? Where does a split-the-difference price fall?
4. Which non-price issues create value, and how much in total? Who should give what to whom?
5. Should Priya make the first offer? Draft one single offer and one set of three MESOs.
6. Priya is tempted to say "we have a quote at 12.50" to anchor Supplier A. Evaluate the tactic on ethical and practical grounds.

The teaching note is at the end of this template, after the answer key.

Typical assignments and grading

Most negotiation courses combine four kinds of assessment:

1. Preparation memos (one page per major role-play): BATNA, reservation value, target, opening, interests and questions. Use mba/mba-negotiation-planner.
2. Debrief memos: what happened, value claimed and created, and what you will change. Use mba/mba-negotiation-debrief.
3. Participation and outcome points: some instructors add a small grade for outcomes relative to the class, to make the stakes real; most keep it small to avoid rewarding deception.
4. A final paper: analysis of a real negotiation you prepared and conducted during the course, or a reflective paper on your style supported by your debriefs.

A rubric that matches what most instructors look for:

Exam and role-play preparation plan

For a written exam, practise three kinds of question: computing reservation prices and ZOPAs from a short scenario; scoring packages and finding the Pareto-efficient trade; and short essays applying a reading (first offers, ethics, culture) to a scenario.

Common struggles

1. Treating the opening ask as information about the ZOPA. An opening is a move, not a fact. Re-estimate the counterpart's reservation price from their alternatives, not from their words.
2. Confusing BATNA with target. The BATNA is what happens if you walk; the target is what you aim for. Mixing them gives weak openings.
3. Forgetting one-off costs when converting the BATNA. Requalification, moving, switching and delay costs belong in the reservation price, spread over the deal's volume or term.
4. Splitting the difference on every issue. It feels fair and leaves value unclaimed by both sides. Score packages before you compromise.
5. Revealing your reservation price. Share priorities and interests; keep your walk-away to yourself.
6. Concessions that grow over time. Increasing concessions signal that more is coming. Plan shrinking steps.
7. Fear of the first offer. When you know the market, an ambitious, justified first offer usually helps you.
8. Deception under pressure. Students who would never lie elsewhere invent competing offers in role-plays. The course grades that as a failure of preparation and of ethics.
9. Weak debriefs. "It went well" teaches nothing. Compute value claimed and created and name one change.

Self-test questions

1. Define BATNA, reservation price and ZOPA, and state how the second follows from the first.
2. A seller's reservation price is 40 and a buyer's is 52. What is the surplus, and what share does the buyer claim at a price of 49?
3. What did Walton and McKersie (1965) contribute, and why does the distinction matter at the table?
4. Explain the negotiator's dilemma in two sentences.
5. Under what conditions does making the first offer help, according to Galinsky and Mussweiler (2001), and what reduces the anchor's effect?
6. Two parties each give an issue the same weight but rank options in opposite order. Is that issue distributive or integrative?
7. What is a MESO, and what two benefits does Leonardelli et al. (2019) report?
8. In the membrane case, why is the requalification cost divided by 1,200,000 and not by 400,000?
9. Name the three approaches to dispute resolution in Ury, Brett and Goldberg (1988) and which is usually cheapest.
10. Is "this is my final offer" when it is not unethical? Give a reasoned answer using the range of tactics in Lewicki and Robinson (1998).

My notes and next steps

Sources and further reading

Primary works:

• Walton, R. E., and McKersie, R. B. (1965). A Behavioral Theory of Labor Negotiations: An Analysis of a Social Interaction System. McGraw-Hill.
• Fisher, R., and Ury, W. (1981). Getting to Yes: Negotiating Agreement Without Giving In. Houghton Mifflin.
• Raiffa, H. (1982). The Art and Science of Negotiation. Belknap Press of Harvard University Press.
• Raiffa, H. (1985). Post-settlement settlements. Negotiation Journal, 1(1), 9-12.
• Lax, D. A., and Sebenius, J. K. (1986). The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain. Free Press.
• Lax, D. A., and Sebenius, J. K. (2006). 3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals. Harvard Business School Press.
• Nash, J. F. (1950). The bargaining problem. Econometrica, 18(2), 155-162.
• Tversky, A., and Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124-1131.
• Galinsky, A. D., and Mussweiler, T. (2001). First offers as anchors: The role of perspective-taking and negotiator focus. Journal of Personality and Social Psychology, 81(4), 657-669.
• Leonardelli, G. J., Gu, J., McRuer, G., Medvec, V. H., and Galinsky, A. D. (2019). Multiple equivalent simultaneous offers (MESOs) reduce the negotiator dilemma: How a choice of first offers increases economic and relational outcomes. Organizational Behavior and Human Decision Processes, 152, 64-83.
• Froman, L. A., and Cohen, M. D. (1970). Compromise and logroll: Comparing the efficiency of two bargaining processes. Behavioral Science, 15(2), 180-183.
• Thompson, L., and Hastie, R. (1990). Social perception in negotiation. Organizational Behavior and Human Decision Processes, 47(1), 98-123.
• Curhan, J. R., Elfenbein, H. A., and Xu, H. (2006). What do people value when they negotiate? Mapping the domain of subjective value in negotiation. Journal of Personality and Social Psychology, 91(3), 493-512.
• Lewicki, R. J., and Robinson, R. J. (1998). Ethical and unethical bargaining tactics: An empirical study. Journal of Business Ethics, 17(6), 665-682.
• Carr, A. Z. (1968). Is business bluffing ethical? Harvard Business Review, 46(1), 143-153.
• Ury, W. L., Brett, J. M., and Goldberg, S. B. (1988). Getting Disputes Resolved: Designing Systems to Cut the Costs of Conflict. Jossey-Bass.
• Brett, J. M. (2001). Negotiating Globally. Jossey-Bass.
• Hall, E. T. (1976). Beyond Culture. Anchor Press/Doubleday.

Textbooks and further reading (named only): Lewicki, Barry and Saunders, Negotiation; Thompson, The Mind and Heart of the Negotiator; Malhotra and Bazerman, Negotiation Genius (2007); Bazerman and Neale, Negotiating Rationally (1992); Raiffa, Richardson and Metcalfe, Negotiation Analysis (2002). Open resource: OpenStax, Organizational Behavior, chapter "Conflict and Negotiations" (CC BY-NC-SA 4.0), https://openstax.org/books/organizational-behavior.

Answer key

1. BATNA: the best course of action if no agreement is reached. Reservation price: the worst terms you would accept in this deal; you get it by converting the BATNA into the terms of this deal, including one-off costs and risk. ZOPA: the range between the seller's and the buyer's reservation prices, if the buyer's is at least the seller's.
2. Surplus = 52 - 40 = 12. Buyer's share at 49 = (52 - 49) / 12 = 0.25, so 25% (=(52-49)/(52-40)).
3. They separated distributive from integrative bargaining (and added attitudinal structuring and intra-organisational bargaining). At the table it reminds you that some issues are a fixed pie and others can be enlarged, and that you must manage both at once.
4. Moves that create value (sharing priorities, exploring options) make you vulnerable to the other side claiming it; moves that claim value (hiding information, hard anchors) make value creation harder. Good negotiators manage the tension rather than choosing one side of it.
5. First offers helped the offerer by anchoring the counterpart. The anchor's effect was reduced when the receiver focused on the offerer's alternatives (and reservation price) or on their own target.
6. Distributive: equal weights with opposite rankings mean any gain for one is an equal loss for the other.
7. Two or three offers of equal value to you, made at the same time. Better economic outcomes for the offerer and higher counterpart satisfaction (the counterpart also reveals priorities by choosing).
8. The requalification cost is incurred once and supports the whole three-year volume of 1,200,000 m; dividing by one year's volume would triple its per-metre effect.
9. Interests, rights and power. Reconciling interests is usually the cheapest and best for the relationship.
10. A false statement of a material fact (for example, a competing offer that does not exist) falls in the clearly unacceptable range. "Final offer" when it is not is a misrepresentation of your position: many negotiators treat it as bluffing within accepted norms, others as a lie that destroys credibility when exposed. A defensible answer names the norm (honesty about facts, discretion about reservation prices), the practical cost (credibility) and an alternative ("this is the best I can do on price today; let us look at terms").

Teaching note: the membrane supply contract

1. Northfield's reservation price (BATNA converted into price per metre).

2. Supplier A's estimated reservation price. Variable cost USD 9.80, plus set-up spread over the volume USD 0.5000 (=600000/1200000), plus the contribution the capacity would earn from spot buyers USD 1.6500 (=0.75*(12.00-9.80)), gives USD 11.95 (=9.80+0.50+1.65), read as a price at Northfield's standard 60-day terms. The weakest estimate is spot utilisation: test it by asking how full the finishing line is this season and how Supplier A fills slack periods.

3. ZOPA on price. USD 11.95 to USD 14.27, a width of USD 2.3231 per metre, or USD 2,787,692 over 1,200,000 m (=(14.2731-11.95)*1200000). The midpoint is USD 13.11. Supplier A's ask of USD 14.10 sits just below Northfield's reservation price, a sign that Supplier A has estimated Northfield's BATNA well. Northfield's share of the surplus at three prices: USD 12.40 gives 80.6%, USD 13.11 gives 50.1%, USD 13.80 gives 20.4% (=(14.2731-P)/2.3231).

4. Value creation.

All three trades create value because each side values the issue differently. A distributive deal at the midpoint (USD 13.11, standard terms) gives Northfield USD 1,395,692 and Supplier A USD 1,392,000 of surplus, USD 2,787,692 in total. An integrative deal at USD 13.00 with 30-day terms, the commitment and exclusivity gives Northfield USD 1,479,117 and Supplier A USD 1,759,507, USD 3,238,624 in total: both sides are better off than at the midpoint, and the extra USD 450,932 is exactly the value of the three trades.

5. Opening move. Priya knows the ZOPA reasonably well, so an ambitious, justified first offer helps her. A single offer could be USD 12.40 at 60 days, justified by Supplier B's quote and Supplier A's cost position. That leaves Northfield USD 1.8731 a metre below its reservation price (USD 2,247,692 over the contract). A MESO set of equal value to Northfield (within USD 5,000 over the contract after rounding prices to cents) solves for the price that keeps that surplus, with exclusivity worth USD 0.125 a metre to Northfield (=150000/1200000):

Supplier A's choice reveals how much it values terms and commitment: package (c) is worth the most to Supplier A, so a choice of (a) would suggest Priya has overestimated Supplier A's financing cost or its interest in a commitment. Her walk-away is USD 14.27 at 60-day terms; at 30-day terms it falls by the financing cost of about USD 0.09 a metre, to USD 14.18 (=14.2731/(1+0.08*30/365)).

6. The invented quote. Claiming a quote at USD 12.50 that does not exist is a misrepresentation of a material fact, the clearly unacceptable end of Lewicki and Robinson's (1998) range, and could expose Northfield legally. It is also bad tactics: Supplier A knows the market, the claim is easy to test, and Northfield needs a three-year relationship. Priya can state truthfully that she has a qualified alternative and that Supplier A's ask is above it once lead time is ignored.

Revision history

Standard and licence note

Based on the primary works of negotiation analysis and behavioural negotiation research cited above (Walton and McKersie 1965; Fisher and Ury 1981; Raiffa 1982; Lax and Sebenius 1986; Galinsky and Mussweiler 2001; Leonardelli et al. 2019) and on the standard textbooks named as further reading. The text, the role-plays, the mini-case, the exhibits and the questions are original; no published case, role-play or textbook text is copied or paraphrased. Northfield Outdoor Co., Corvane Robotics and Tallow Creek Medical Center are fictional. This guide is independent and not affiliated with or endorsed by any business school, publisher or negotiation programme. Check your own syllabus and instructor's rules before you rely on it. Template licence: MIT.