Distributive Bargaining Definition:
Distributive bargaining is a negotiation strategy where parties compete over the distribution of a fixed amount of value, often leading to a win-lose situation. It is commonly used in scenarios like salary negotiations, where one party’s gain is the other party’s loss.
Key Features of Distributive Bargaining:
- Fixed Pie Assumption:
The assumption that the resources available are limited, and each party aims to maximize their share of the pie. - Competitive Negotiation:
Each party adopts a competitive approach, often leading to hard bargaining tactics like anchoring, making high initial demands, and offering minimal concessions. - Short-Term Focus:
Distributive bargaining typically focuses on immediate outcomes rather than long-term relationships, making it more suitable for one-time transactions.
How Does Distributive Bargaining Work?
In distributive bargaining, each party begins by setting their initial positions, which are often far apart. Negotiation involves a series of offers and counteroffers, with each party trying to gain the most favorable terms possible. The process typically involves tactics such as making the first offer (anchoring), using objective standards to justify demands, and strategically timing concessions to gain advantage. The negotiation concludes when the parties reach an agreement that both can accept, although it may not fully satisfy either side.
Best Practices for Distributive Bargaining
- Preparation:
Understand your goals, the other party’s likely position, and the context of the negotiation. Preparation is key to effective distributive bargaining. - Know Your BATNA:
Determine your Best Alternative to a Negotiated Agreement (BATNA) before entering negotiations. Knowing your fallback position strengthens your negotiating power. - Control the Anchor:
If possible, make the first offer to set the anchor point, which can significantly influence the final outcome of the negotiation. - Manage Concessions:
Offer concessions strategically, starting with less critical points and saving key issues for later in the negotiation to maximize leverage.
