Distribution bargaining

You see a used car advertised for sale in the newspaper. It appears to be just what you have been working for. You go out to see the car. It is a great and you want it. The owner tells you the asking price. You don’t want to pay that much. The two of you then negotiate over the price. The negotiating strategy you are engaging in is called distributive bargaining. Its most identifying feature is that it operates under zero-sum conditions. That is, any gain it makes is at your expense and vice versa. Referring back to the used car example every dollar you get the seller to cut from the car’s price is a dollar you save. Conversely, every dollar more the seller can get from you comes at your expense. So the essence of distributive bargaining is negotiating over who gets what share of a fixed pie. By fixed pie, we mean that the bargaining parties believe there is only a set amount of goods or services to be divided up. Therefore, fixed pies are zero-sum games in that every dollar in one party’s pocket is a dollar out of their counterpart’s pocket. When parties believe the pie is fixed, they tend to bargain distributive.

Probably the most widely cited example of distributive bargaining is in labor management negotiations over wages. Typically, labor representatives come to the bargaining table determined to get as much money as possible out of management. Because every cent more that labor negotiates increase management’s cost each party bargains aggressively and treats the others as an opponent who must be defeated.

The essence of distributive bargaining is depicted. Parties A and B represent two negotiators. Each has a target point that defines what he or she could like to achieve. Each also has resistance point, which marks the lowest outcome that is acceptable – the point below which they would break off negotiations rather than accept a less favorable settlement. The area between these two points makes up each one’s aspiration range. As long as there is some overlap between A’s and B’s aspiration ranges, there exists a settlement range in which each ones aspirations can be met.

When engaged in distributive bargaining one’s tactics focus on trying to get one’s opponent to agree to specific target point or to get as close it as possible. Examples of such tactics are persuading your opponent of the impossibility of getting to his or her target point an the advisability of accepting a settlement near yours; arguing that your target is fair, while your opponent’s isn’t and attempting to get your opponent feel emotionally generous toward you and thus accept an outcome to your target point.

Another distributive bargaining tactic is revealing a deadline. Consider the following example. Katrina is a human resources manager. She is negotiating salary with Rane, who is a highly sought after new hire. Because Rane knows the company needs him, he decides to play hardball and ask for an extraordinary salary and many benefits. Katrina tells Rane that the company can’t meet his requirements. Rane tells Katrina that he is going to have to think things over. Worried the company is going to lose Rane to a competitor, Katrina decides to tell Rane that she is under time pressure and that she needs to reach an agreement with him immediately or she will have to offer the job to another candidate. Would you consider Katrina to be a savvy negotiator? Well, she is why? Negotiators who reveal deadlines speed concessions from their negotiating counterparts making them reconsider their position. And even though negotiators don’t think this tactic works in reality negotiators who reveal deadlines do better.