Distributive negotiation
Distributive negotiation refers to a competitive bargaining process where one party's gain is directly linked to another party's loss, often framed within a zero-sum game scenario. This means that the resources up for negotiation, likened to a pie, cannot be expanded; when one party secures a larger share, the other receives less. Historically, such negotiations were common in merchant-consumer transactions, though many modern purchases, like retail goods, come at fixed prices. However, certain markets, such as those for vehicles or real estate, still allow for negotiation.
In distributive negotiations, the primary goal is for each party to maximize their own benefits rather than to achieve a fair outcome. The dynamics can shift based on external factors like supply and demand, which may advantage one party over the other. Effective negotiators often establish a reservation point—the maximum they are willing to pay or accept—to avoid unfavorable agreements. They may also identify a Best Alternative to a Negotiated Agreement (BATNA), which empowers them during negotiations by providing leverage. Understanding these concepts can help individuals navigate bargaining situations more strategically.
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Distributive negotiation
Distributive negotiations are a type of bargaining in which one party cannot gain without the other party losing something. In the past, most deals between merchants and consumers were considered distributive negotiations. In the modern world, many products have fixed prices. However, some purchases, such as vehicles, may still be negotiated.
Overview
Distributive negotiation involves bargaining or haggling over a sales price. For example, if a customer in a marketplace argues with a merchant over the value of a particular item, the two are engaging in distributive negotiations. The defining trait of distributive bargaining involves one party losing what the other gains. When haggling with a merchant, every dollar saved by the customer is a dollar lost by the merchant in terms of profit.
When entering a distributive negotiation, the goal is not for the two parties to reach a fair agreement. Instead, each party intends to secure as much capital for itself as possible. As each party struggles to secure the maximum amount of resources, the parties may sometimes reach a fair agreement. However, outside circumstances such as supply and demand may heavily tilt the power balance of the negotiations in favor of one party, resulting in this party getting a better deal.
Many products that consumers encounter in modern society come with a firm price. In the past, it may have been possible for consumers to directly negotiate with their grocer, haggling over the price of produce, but grocers today do not do this. Customers may purchase goods at the market’s stated price or leave without purchasing them. However, transactions that do not take place through large retailers or corporations may still be open to haggling. These purchases include vehicles, homes, or purchases from smaller, independently owned retailers.
Skilled negotiators use several practices to ensure they gain as much as possible during distributive negotiations. When expecting to resort to distributive negotiation, individuals should determine their reservation point in advance. This is the theoretical point at which they will walk away from a deal.
For example, when negotiating the price of a home, someone might decide in advance that they are willing to pay up to $90,000. If the other party is not willing to agree to meet or beat that price, they will walk away from the deal. Planning a reservation point can help negotiators avoid agreeing to unexpected or unreasonable demands.
Many negotiators also work to define a best alternative to a negotiated agreement, or a BATNA. A BATNA allows people to negotiate more aggressively and may force the other party to offer a more favorable deal. For example, a prospective employee interviewing for a job can ask for higher wages if they have other job offers pending.
Bibliography
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