Bargaining Integrative and Distributive Strategies

Negotiation is a critical component of human communications. Even the most mundane interactions we have in our daily lives can involve negotiation, such as where to eat dinner and what to order. Usually in these simple situations we do not think about the strategies of negotiation because the outcomes are relatively unimportant. Yet when it comes to higher stakes negotiation, it becomes important to recognize the various types of strategies that can be used, to choose strategies that are generally more effective and can create win-win results.

Distributive negotiation does not tend to create results of maximum benefit to all parties. What distributive negotiation can do is provide the semblance of fairness through the principle of equal distribution. Distributive negotiation lives up to its name because it typically entails taking a mutually desired outcome and dividing it among stakeholder parties. Sometimes, distributive justice can seem like it results in a lose-lose situation, as neither party receives a hundred percent of what they had hoped for.

In most cases, though, distributive justice results in a win-lose scenario because one or the other party will start to exert pressure or use coercive tactics to force a win; thereby leading to one side getting more than its fair share. The following example illustrates distributive negotiation. For example, I am in the market to rent a condo. I find a condo I like on the rental market, and the owner wants to lease it to me for $3,000 per month on a term of one year.

I laugh at the owner's price, and tell him that the condo is worth no more than $2,000. The owner tells me that the condo next door is being leased at $3,000 and remains firm in his price.

Instead of looking for a new place or asking the owner to throw in his television and some furniture for the price, I tell the owner that I did my research beforehand, and discovered that he had been renting to his previous tenant in cash only and was pocketing the money without declaring his taxes. With this information as leverage, I introduce a new proposition. I report him to the IRS, or he can lease the condo to me for $2,000.

The owner, afraid of being reported to the IRS, agrees, and I feel like I got a great deal. Clearly, I did receive a lease agreement at below market value. Yet what I do not recognize are two facts. First, the owner could opt to clear up his tax record during my first year of residence and then refuse to renew my lease, reporting to me that now that he is in the clear he would prefer to either receive the $3,000 or find a new tenant.

Second, using distributive negotiation strategies, I fail to generate more value from the condo by forging a friendship with my new landlord, who turns out to be best friends with someone in a position of power in my profession and could have helped me secure a promotion. Likewise, I could have added value to the condominium itself by introducing additional value-added products and services that might have benefitted both of us.

For instance, if I own a window washing business, I might have asked the condo owner to recommend my services to the homeowners association and thereby gain a new contract. In fact, integrative negotiation is the method of bargaining whereby both parties agree to add value in order to create a win-win situation. Using the above examples, adding value would have entailed building a trusting and mutually beneficial relationship with the condo owner that could have helped promote my career.

Had I done even more research on the condo owner, I would have recognized that getting the rent down to a price that I liked might have been less lucrative in the long run than securing the promotion that I would have liked in my job. Similarly, if I owned a window washing company, I could have received a contract that over the long run would have netted my employees and me far more income than simply saving some money on my monthly rent payments.

Integrative negotiation is mutually beneficial to both parties. However, there may be some situations where integrative bargaining becomes untenable. As Spangler (2003) points out, there is only so much potential added value in any given situation. Moreover, some bargains may not be worth attempting an integrative strategy. Yet distributive negotiation tends to be a tactic used by people or organizations that possess significant power over their bargaining partners, and wield that power in order to gain maximum value. These types of negotiators are not interested in integrative solutions.

Particularly in situations where a near-monopoly is enjoyed, the more powerful entity knows that its bargaining partner has few other choices. If the aforementioned condo was the last one on the market in the town, then the owner might have retained upper hand in the situation and laughed at my $2,000 offer instead of being willing to succumb to my pressures. Airlines and other companies often use distributive negotiation in their pricing schemes, and as a result.