Expanding the pie
Most deals involve more than one issue; trade the things you care about less for the things you care about more, and both sides can end up better off.
Two ways to bargain
Distributive · split the pie
A fixed amount is divided: win-lose. Haggling over the price of a rug at a market with nothing else on the table is the classic case. The only question is who gets the bigger slice.
Integrative · grow it, then split it
First look for ways to create value, by finding trades that are cheap for one side and valuable to the other. Then divide the bigger result. You still claim your share; there's just more to share.
Check yourself
What is the fixed-pie bias?
- Refusing to negotiate over more than one issue at a time
- Assuming the other side wants exactly the opposite of what you want
- Always asking to split the difference down the middle
- Believing the first offer decides the final price
Show the answer
Assuming the other side wants exactly the opposite of what you want
Right. It's the assumption that every gain for them is a loss for you. Often it isn't true: they may care most about something that matters little to you.
THE CORE MOVE
Trade across issues
List the issues on the table and ask: which ones do I care about most, and which do they? Where your rankings differ, each side gives on what matters less to it and gets what matters more. Negotiation books call this logrolling. It only works if you've found out their priorities, which is what the questions from lesson 7 are for.
Kian's bakery buys flour from a supplier. Kian cares most about the price. The supplier, it turns out, cares most about getting paid quickly, because cash flow is tight.
Kian and the flour supplier: three issues.
Issue Kian cares Supplier cares
Price most some
Payment days little most
Delivery day some little
Today: pays in 30 days; supplier wants a price rise.The trade:
Kian pays in 7 days instead of 30.
The supplier keeps the price flat.
Kian gives on what matters little to him (payment days)
and gets what matters most (price). The supplier does
the opposite. Both are better off than before.Neither side "won" the other's top issue in a tug of war. They swapped. A single-issue talk about price alone could only have ended with one of them losing.
Check yourself
Kian values price most; the supplier values fast payment most. Which deal is best for both?
- They split the price rise in half and keep 30-day payment
- Kian pays in 7 days and the supplier keeps the price flat
- Kian accepts the full price rise to keep the relationship friendly
- The supplier holds the price and Kian moves to 60-day payment
Show the answer
Kian pays in 7 days and the supplier keeps the price flat
Yes. Each side gives on the issue it cares less about and gets the one it cares most about. That's a bigger pie than any split of the price alone.
Grow the pie, step by step
- Add issues
A negotiation about price alone is always win-lose. Bring in delivery dates, warranty, payment timing, extras, contract length, references. Each new issue is something you can trade.
- Rank them for both sides
Rank the issues for yourself, then make your best guess for them, and test that guess with open questions.
- Negotiate them as one package
"Let's look at price, delivery and payment terms together." Settling issues one by one throws away the chance to trade between them.
- Offer two or three packages
Put forward two or three packages you'd be equally happy with and ask which they prefer. Their choice tells you what they value, without anyone having to reveal it.
Check yourself
Sara has a job offer. Which of these could she put on the table as issues to trade?
- Start date
- Number of remote days
- Training budget
- The weather on her first day
- Base salary
- The colour of the company's logo
Show the answer
A tradeable issue: Start date, Number of remote days, Training budget, Base salary
Not something to negotiate: The weather on her first day, The colour of the company's logo
Swapping lunches at school
One child hates the apple in their lunchbox and loves biscuits; the other is the reverse. They swap, and both lunches just got better, even though no extra food appeared. That's trading across issues: the pie grew because the two of them valued the same things differently. Where the analogy breaks: in real deals you often don't know the other side's tastes, so you have to ask.
WHEN YOU DISAGREE ABOUT THE FUTURE
Contingent agreements
Sometimes you're stuck because you predict the future differently: they're sure sales will boom, you're not. Instead of arguing about who's right, write the prediction into the deal. Each side is betting on its own forecast, so each is happy to agree.
Kian and his supplier: "If Kian buys more than 1,000 bags this year, the price drops 5% from then on." The supplier is happy because it expects big orders to be cheap to deliver; Kian is happy because he's covered if his bakery grows.
Check yourself
Settling each issue one at a time is the cleanest way to negotiate: agree the price, then move on to delivery, then payment.
Show the answer
False
False. Once price is settled on its own, you can no longer offer faster payment in exchange for a better price. Keeping the issues together as one package is what makes trading across them possible.
Lesson recap
- Distributive bargaining splits a fixed pie; integrative bargaining grows it first, then splits it.
- The fixed-pie bias: in one well-known study about two-thirds of negotiators wrongly assumed the other side wanted the opposite.
- Trade across issues: give on what matters less to you for what matters more, as Kian did with fast payment for a flat price.
- Add issues, negotiate them as one package, and offer two or three packages to learn what they value.
- Use contingent agreements when you disagree about the future, and still claim your share.
- Prep-sheet line: issues on the table, ranked for me and (my guess) for them.