What is distributive negotiation exactly? Anyone who participates in negotiation has dealt with a situation where one party seeks to gain more and more until a good deal is too far away to reach. When the bargaining breaks down and each person focuses on their own goals, it shifts from integrative bargaining to distributive negotiation. In other instances, the parties seek to negotiate over a fixed resource and work within distributive bargaining from the beginning.
Distributive negotiation can stall the bargaining process and lead the parties further from a negotiated agreement. However, it does have its place within the negotiation world and can be a useful strategy to achieve a deal in the short term.
This article will answer what is distributive negotiation, discuss strategies to work within distributive bargaining, and summarize the advantages and disadvantages of distributive negotiation.
Distributive Bargaining Defined
Distributive negotiation is a competitive negotiation strategy that focuses on dividing the fixed amount of value between the parties involved. It is often a win-lose situation in which one party wins and the other party loses. It is often compared to a different type of negotiation, integrative bargaining, which results in a win-win solution and includes a focus on value creation over claiming limited resources.
Integrative negotiation is most frequently desired and bolsters the relationship between the two parties, but it is not always possible to achieve, and distributive negotiations result. The differences between the two types further outline the difficulty of distributive bargaining.
There are a few characteristics that help to further define distributive bargaining, including:
- Fixed Resources
The main characteristic of distributive bargaining situation is that the resources involved are fixed, meaning that both parties will be competing for the same amount of money. There is a single pie and only that pie to divide between the parties. This can be compared to integrative negotiations, where the parties are adding other ideas and resources to create value.
- One Issue
Another common characteristic is that distributive negotiation is most frequently focused on only one issue, unlike integrative negotiation where the parties often create value by involving other issues that are important to the other party.
- Unilateral Concessions
Distributive negotiation also involves unilateral concessions, which is a situation where one party is giving up something from the fixed resources and the other party only gains from the negotiation. In contrast, integrative negotiation will often involve the parties trading concessions to reach a possible agreement.
By comparing integrative negotiations and distributive negotiations, as well as surveying the various characteristics that make up distributive bargaining, it is clear that distributive negotiation is difficult to work with, but not impossible to overcome.
Four Basic Distributive Negotiation Tactics
Succeeding in a distributive negotiation requires a skilled negotiator and a host of negotiation skills to ensure that the involved parties will not fail to reach a consensus. There are some common strategies that either party can use to attempt to gain the maximum share allotted to them.
1. Know the Other Party’s BATNA and Reservation Point
One of the best ways that a party can excel as a negotiator in a zero-sum negotiation is to understand the other party’s BATNA, which stands for the best alternative to a negotiated agreement. This is the best possible outcome for the other side if they cannot reach a deal. It can be that there are many other opportunities outside of this win-lose situation, so they may be difficult to bargain with effectively. However, another person may have a very bad BATNA, which means that they will be more willing to give concessions. Understanding what you are up against at the start of the negotiation can help determine how much you push for your own goal.
Knowing the BATNA for the other side can also help drive a deal because it determines the reservation point. The reservation point is the spot where the BATNA becomes better than the deal and can undermine the value of the agreement. This can further determine how hard you push.
2. Add Contingencies
Because distributive negotiation is notorious for unilateral concessions, it can be helpful for the process to add contingencies to concessions. This means that you will tell the other person that you are willing to give them more if they are willing to let you claim more in a different area of the negotiation. This can be difficult in negotiations with one issue, but smart negotiators can find tactics to add value in the zero-sum game.
3. Actively Listen to the Other Person
People can claim and add value while negotiating by actively listening to what the other person is saying rather than preparing a counteroffer. When listening to the other person, the negotiators can focus on the interests at play and find ways to resolve their disagreements without losing more value.
4. Announce Concessions
When negotiating a deal, there is a tendency to negate or diminish the concessions that have been made. One of the strategies to avoid this happening to you is to announce when you are taking a hit. These tactics ensure that the goals of both parties are realized as they participate.
These tactics are an example of how to handle a necessary distributive bargaining session and become a skilled negotiator in the process.
Advantages and Disadvantages of Distributive Negotiations
As mentioned at the beginning of this article, distributive negotiation is something that most negotiators will try to lead the negotiation away from. However, there are situations where there can be an advantage to this type of bargaining.
Some situational advantages of distributive negotiation include:
- Power Struggles: The advantage of negotiating distributively can be apparent in situations with power struggles. For example, if a single person was going against a team of negotiators from a large company, they may not have the power to protect their assets without working distributively. When a company or person has a large amount of money and power, this can cause an imbalance that does not allow integrative negotiation.
- Fixed Assets: If the assets in a situation are fixed and no other value can be added, the parties may end up having to offer and counteroffer until they resolve.
- Time Crunches: When the parties are in a time crunch, it can be near impossible to take the time to identify interests. In this situation, it may be best to split the pie and get a deal quickly.
These advantages are limited because this type of negotiation is often detrimental to relationships and harms the overall well-being of the participants, especially if they are the ones “losing.”
Some situational disadvantages of distributive negotiation include:
- Loss of Interest: When someone is competitive to a detriment, they will often lose the commitment and interest of the other person. Even if they can agree, they may not be able to enforce the deal because no one is interested in the outcome.
- Loss of Relationship: Similarly, by forcing competition and refusing to allow the other participants to counter offers you made, you will alienate friends and not win in the same way you believed you had.
While winning in a negotiation is what everyone would like, doing so by force or competition is likely not the example that the parties want to set when working toward relationships and contracts. Finding a way to work together and create value will always help a situation.
However, if distributive negotiation is necessary, it is possible to excel and create a winning solution out of a win-lose situation.