Wise negotiators recognize the value of both collaborating and competing at the bargaining table. They look for ways to increase the pie of value for all parties, often by identifying differences across issues and making tradeoffs. And they also rely on distributive bargaining strategies to try to claim as much of that larger pie for themselves.
What are distributive bargaining strategies? Distributive bargaining refers to the process of dividing up the resource or array of resources that parties have identified. In many negotiations, that means haggling over issues such as price. By comparison, integrative bargaining involves collaboration or integrating across multiple issues to create new sources of value.
People often think that distributive bargaining strategies require adversarial bargaining, such as making tough demands, threats, or bluffs. But in fact, the most effective distributive bargaining strategies do not require you to sacrifice your integrity or resort to dirty tricks. Rather, they require you to set aside plenty of time before your negotiation to engage in clear-eyed preparation.
Putting Distributive Bargaining Strategies to the Test
In one study, UCLA School of Law professor Russell Korobkin and UCLA School of Law Empirical Research Group director Joseph Doherty had law school students engage in a settlement negotiation simulation that drew on an example of distributive bargaining.
Pairs of students playing the roles of plaintiff’s and defendant’s attorneys were told to attempt to negotiate a settlement of an age-discrimination lawsuit, based on a real case, in which the plaintiff was suing his former employer for $100,000. Both sides received the same information about the merits of the case and the relevant legal standards. The “facts” gave neither side an edge.
What distributive bargaining strategies were most effective? The best predictor of “winning” outcomes in this distributive negotiation—claiming the lion’s share of the bargaining range—were negotiators’ estimates of the other side’s bottom line. The more accurately a negotiator estimated his counterpart’s bottom line, the more money that negotiator successfully claimed.
The study identified other important factors that may improve your settlement outcomes in the real world, including setting high aspirations (or “targets”), making an aggressive first offer, and being willing to go to court if necessary.
A Checklist of Distributive Bargaining Strategies
The distributive bargaining strategies identified in Korobkin and Doherty’s study should be effective in any two-party negotiation. Review the following checklist before you engage in any negotiation where you will be competing for scarce resources:
- Estimate their bottom line. Most negotiators understand the value of evaluating their own bottom line—the least amount they would accept before walking away from the bargaining table. But we often overlook the importance of estimating our counterpart’s bottom line. To do so, research the other party’s bargaining strength and interests, which may include examining the outcomes of her past negotiations and her likely best alternative to a negotiated agreement (BATNA). Once at the table, ask lots of questions to determine her interests and constraints as well.
- Set high aspirations. Another important part of your negotiation preparation is to set an ambitious yet realistic aspiration level or goal. That doesn’t mean making outrageous demands; rather, prepare arguments that will make your ambitious aspirations seem reasonable.
- Anchor aggressively. The negotiator who makes the opening offer in a price negotiation typically gets the better deal, considerable negotiation research shows. Why? Because of the first figure named in a negotiation “anchors” the discussion that follows. If you are well informed about the value of the commodity you’re negotiating, prepare to drop an ambitious first anchor.
- Identify a strong BATNA. When you have a strong BATNA, you will be in a good position to reject a mediocre agreement. As a result, a strong BATNA is typically your best source of power in a negotiation. After identifying your BATNA, you should take steps to improve it, when possible, by conducting negotiations on multiple fronts.
In the end, when it comes to effective bargaining strategies, the difference between distributive and integrative negotiation is not great. Both aspects of negotiation require you to engage in significant reflection and research before you sit down at the table. The more you know about the issues at stake, your counterpart’s interests and constraints, and your own preferences and limitations, the better positioned you will be to successfully deploy distributive bargaining strategies and claim value in your next negotiation.
What distributive bargaining strategies have you found to be most effective in negotiation?
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I teach “negotiation” at a law school in New England. In a negotiation exercise presented to my students, I told them that price is the only issue to be negotiated. Half way through the semester, after teaching and practicing win-win strategies, I instructed them they would be graded only on the final outcome of a price-only issue negotiation. In fact, I instructed them that the seller with the highest price would receive the highest score and the buyer with the lowest price would receive the same highest score. After the exercise, I polled the students to ask if they belived the grading scheme were fair. Only those who represented hypothetical sellers and achieved a high price and buyers’ representatives achieving the lowest price believed the grading scheme to be “fair.” All others responded, to my polling, that the grading scheme was “unfair.” This result, in itself, presents a marvelous topic of discussion about the art and outcomes of negotiation.
Katie Shonk is right on point, as usual. In my graduate class in Negotiation and Mediation we address distributive bargaining early in the course but move on quickly to the mutual benefits of integrative bargaining. I want them to create value for long-lasting win-win outcomes. But we don’t always have the luxury of participating in integrative negotiations. We have to deal with other parties that seek to claim value and compete at the table. If we are too collaborative we will be disadvantaged by a single-minded negotiator employing win-lose tactics. We then glance at the table and wonder what happened to the other five slices in a six slice pizza pie. Katie rightfully points out that this kind of bargaining does not have to be adversarial, but it must be based on a firm and assertive, even aggressive, strategy. This will be part of my week one discussion right before the used car role-play. Thanks again, Katie.