MAXIMIZING JOINT RETURNS WHEN NEGOTIATING

August 30, 2012

Once bargaining parties have achieved mutually acceptable terms, they tend to think their interaction is complete – forgetting one last stage. During the Cooperative Stage they should work to maximize their joint returns. Throughout the prior stages of their interaction, both sides have usually over- and under-stated the value of the items being exchanged for strategic purposes. One side over-states the value of something it knows the other side really wants, to make that party believe it is receiving a significant concession when it obtains that term. The other party under-states the value of an item it really desires to make the other side think its concession on this issue is not that great. When they initially reach an accord, Side A may end up with several items that Side B actually values more highly, and Side B may have several terms Side A would prefer.

The bargaining parties should use the Cooperative Stage to see if they can expand the overall pie and simultaneously improve their respective positions. One side should offer to trade items it thinks the other side values more highly for terms it believes it values more highly than the other party. If they can discover these terms and make sure they end up on the correct side of the bargaining table, both sides will be better off. On some occasions, offers to trade such items fails to discover any terms that should be exchanged. In such cases, the parties have probably achieved efficient agreements that cannot be improved.