Bargaining for Advantage

Bargaining for Advantage Plot Summary

Introduction

Negotiation is a fundamental skill that shapes virtually every aspect of our personal and professional lives. Whether we're asking for a raise, purchasing a home, resolving a disagreement with a loved one, or brokering a complex business deal, our ability to negotiate effectively determines our outcomes. Yet many people approach negotiation with anxiety, misconception, or avoidance—seeing it as an uncomfortable confrontation rather than an opportunity for mutual gain. The truth is that negotiation isn't about aggressive tactics or manipulative techniques. It's about understanding human psychology, building relationships, and creating value through strategic communication. By mastering the principles in these pages, you'll transform your approach to conflict and disagreement. You'll discover how to turn potential confrontations into collaborative problem-solving sessions that yield better results for everyone involved. This journey begins with understanding yourself and extends to creating lasting agreements that stand the test of time.

Chapter 1: Understand Your Negotiation Style

Your personal negotiation style is the foundation upon which all your bargaining success is built. This unique approach to handling conflict and pursuing agreements reflects your natural tendencies, values, and comfort zones when facing negotiation situations. Some people naturally adopt a competitive stance, focusing on winning at all costs, while others prefer cooperation, seeking solutions that benefit everyone involved. Neither approach is inherently superior—effectiveness depends on matching your style to the situation. Consider the contrasting approaches of Steve Ross, founder of Warner Communications, and CNN's Larry King. During a casual card game on a corporate jet, Ross lost the final hand just before landing. Rather than accepting defeat, he ordered the pilot to circle the airport until he finally won a hand. This competitive approach characterized his business negotiations as well. In contrast, when King was being courted by other networks, his agent had secured impressive competing offers to leverage against CNN's Ted Turner. When Turner called King directly and simply said, "Stay with me," King immediately agreed, bypassing the competitive negotiation his agent had set up. King valued relationships and felt comfortable with his current situation. Your negotiation effectiveness stems from understanding and leveraging your natural tendencies rather than forcing yourself into uncomfortable approaches. Even highly successful people sometimes avoid negotiations altogether. The founder of a major internet company once confided that negotiations make him uncomfortable, so he delegates them to executives who excel at bargaining. He focuses instead on innovation and strategic planning, playing to his strengths rather than trying to overcome his weaknesses. To identify your style, consider how you would respond in this scenario: You're seated at a table with nine strangers. Someone offers $1,000 to each of the first two people who can persuade the person sitting opposite to stand behind their chair. What would you do? Your instinctive response reveals your negotiation tendencies—whether you'd avoid the situation, seek a compromise, accommodate the other person, compete aggressively, or collaborate to find a creative solution where both parties win. The most effective negotiators exhibit four key habits regardless of their style: thorough preparation, high expectations, patient listening, and personal integrity. Research consistently shows that preparation significantly improves negotiation outcomes. Similarly, negotiators who expect more generally get more, provided their expectations are justified and realistic. Listening skills are equally crucial, as competitive negotiators often spend most of their time talking rather than understanding the other party's position. Remember that understanding your style isn't about changing who you are—it's about leveraging your natural strengths while developing awareness of when different approaches might serve you better. The goal is flexibility and conscious choice rather than habitual reaction.

Chapter 2: Set Clear Goals and High Expectations

Goals drive negotiation success. Without clear objectives, you cannot know when to say "yes" or when to walk away. The more specific your vision and the stronger your commitment to it, the more likely you are to achieve favorable outcomes. This principle was powerfully demonstrated by Sony's founder Akio Morita in 1955 when his small Japanese company introduced a miniature transistor radio to the American market. When Bulova, a respected American electronics company, offered to buy 100,000 radios—an order worth several times Sony's total working capital—Morita was thrilled. However, Bulova insisted that Sony manufacture the radios with Bulova's brand name instead of Sony's. This condition directly conflicted with Morita's long-term goal of establishing Sony as a global brand known for innovative, quality products. Despite his board's enthusiastic recommendation to accept the deal, Morita declined Bulova's massive order. When the Bulova purchasing officer reminded Morita that nobody had heard of Sony, Morita replied, "Fifty years ago, your brand name must have been just as unknown as our name is today. I am now taking the first step for the next fifty years of my company." Shortly afterward, Morita received a smaller order from another American distributor who allowed him to keep the Sony name on the radios. The product caught the American public's attention, and Sony became a household name worldwide within decades—validating what Morita later called "the best decision I ever made." Research confirms that negotiators with higher aspirations consistently outperform those with modest goals. In a classic study by psychologists Sydney Siegel and Lawrence Fouraker, negotiators assigned ambitious targets achieved significantly better results than those given modest goals. The high-target group achieved a mean profit of $6.25, far outperforming the median profit of $3.35 achieved by the modest-goal group. To set effective negotiation goals, begin by distinguishing between your aspiration level (what you hope to achieve), your expectation level (what you realistically believe you can achieve), and your bottom line (the minimum acceptable outcome). Most negotiators focus primarily on their bottom line, but research shows this approach leads to suboptimal results. Instead, concentrate on developing well-considered expectations that stretch beyond your comfort zone. Make your goals specific and measurable. Rather than aiming to "get a good deal," define exactly what that means in concrete terms. Write down your goals and share them with someone who will hold you accountable, as public commitments strengthen resolve. Remember that your expectations become a self-fulfilling prophecy that shapes both your behavior and your counterpart's perception of what's possible.

Chapter 3: Leverage Compelling Standards

Negotiations harness one of human nature's most basic psychological drives: our need to maintain consistency and fairness in our words and deeds. When you can frame your proposal within recognized standards, norms, or precedents, you gain significant persuasive power. This principle transforms "I want" into "This is fair because..." and provides a foundation for agreement that goes beyond mere positional bargaining. A powerful illustration comes from a story about tribal people in the Philippines who became embroiled in a dispute over borrowed pigs. A man borrowed two pigs from his neighbor and, two years later, the lender asked for repayment. Within the tribe, there was a standard "interest rate" for borrowing animals—the "natural rate of increase" during the loan period. For a two-year loan of two pigs, the standard called for repayment of four pigs. However, the lender demanded six pigs, claiming the loan period was slightly longer and one pig was of a special breed. The borrower angrily countered that everyone knew four was the right number. After much haggling, a respected elder mediated the dispute. The final solution was ingenious: the borrower would pay five pigs (the lender's demand), but the elder would keep two as his fee, giving the lender only three (the borrower's last offer). This resolution satisfied both parties while preserving community peace by referencing established standards that both sides recognized as legitimate. Standards and norms play equally important roles in modern negotiations. Financial markets set interest rates for borrowing money. Real estate brokers reference "comparable transactions." Investment bankers analyze business values based on earnings multiples. These frameworks help buyers and sellers form opinions about fair prices and permit all participants to discuss their preferred positions without appearing unreasonable. To maximize your normative leverage, use standards and norms that your counterpart views as legitimate. If you frame your proposal within their preferred standards rather than insisting solely on your own principles, you'll be more persuasive. For example, if you're a nurse executive negotiating for more training budget while surgeons want funding for new offices, you'll have an advantage if hospital administrators have previously emphasized "quality patient care" as a priority. Be alert to "consistency traps" where others try to get you to agree to seemingly innocent standards before revealing their implications. Telemarketers use this technique when they ask, "Would you like to save money?" before pitching their service. At the bargaining table, manipulative negotiators might get you to endorse a principle, then spring their trap by arguing that your position violates it. Remember that standards alone rarely determine negotiation outcomes. They serve as admission tickets that establish your request as legitimate and get the other side's attention. Your proposal must also be within the other party's capability and interests, and your manner of communication must be persuasive for standards to translate into successful agreements.

Chapter 4: Build Relationship Capital

Negotiation is fundamentally about people—their goals, needs, and interests. Your ability to form and manage personal associations at the bargaining table is therefore critical to your success. Personal relationships create trust and confidence that facilitate communication and deal-making. At the core of these relationships is a fragile interpersonal dynamic: trust. With trust, deals get done. Without it, negotiations become more difficult and vulnerable to changing circumstances. The secret to creating and sustaining trust in negotiation is the norm of reciprocity—the obligation to return favors and maintain fairness in exchanges. This powerful norm operates in all sorts of transactions, big and small. A compelling example comes from American business history involving steel mogul Andrew Carnegie and banker J.P. Morgan. During the financial Panic of 1873, Carnegie needed cash and offered to sell Morgan his share in a partnership for $60,000—$50,000 for the partnership credit plus $10,000 profit. Morgan agreed. The next day, when Carnegie came to collect, Morgan handed him two checks—one for $60,000 and another for $10,000. Morgan explained that Carnegie had mistakenly undervalued his credit, which was actually worth $60,000, not $50,000. Carnegie was stunned by Morgan's honesty and tried to return the extra $10,000, but Morgan refused. This gesture made a profound impression on Carnegie, who wrote in his autobiography that he determined "neither Morgan, father or son, nor their house, should ever suffer through me. They had in me henceforth a firm friend." Morgan could have legally paid $10,000 less, but he chose to establish a special relationship with Carnegie—something beyond the contractual, "everyone for himself" model of the marketplace. The norm of reciprocity in negotiation amounts to a simple, three-step code of conduct: First, be trustworthy and reliable yourself. Second, be fair to those who are fair to you. Third, let others know when you think they have treated you unfairly. This code is powerfully illustrated by the "ultimatum game" experiment, where one person must offer to split $100 with a stranger, who can either accept the division or reject it (causing both to get nothing). Although $2 is better than nothing, many people reject unfair offers of $98/$2, preferring to punish unfairness even at personal cost. When planning negotiations, review the relationship factor as a routine part of preparation. Consider whether you're dealing with a personal friendship or a working relationship, as each carries different expectations. Research shows that friends negotiate differently than strangers—they start with more modest goals, make bigger concessions, argue less, and tell more truth. However, they also explore fewer options and may miss opportunities for mutual gain by focusing on simple compromises. To build trust with new counterparts, leverage the similarity principle (finding common ground), exchange appropriate gifts or favors as symbols of good faith, and utilize relationship networks that provide access and credibility. Remember that relationship capital must be both built and maintained through consistent trustworthy behavior over time.

Chapter 5: Master Information Exchange

Effective negotiators exhibit a crucial trait: the ability to see the world from the other party's point of view. To succeed, you must learn to ask how it might serve the other party's interests to help you achieve your goals. Then determine why they might say "no" so you can remove as many objections as possible. Understanding what the other party really wants is critical to information-based bargaining, and it's not as easy as it sounds. Consider this example: A U.S. hospital conducting a clinical trial for a foreign pharmaceutical company faced a roadblock. The overseas drug company refused to follow an FDA recommendation about patient consent forms, threatening the entire project despite shared interests in its success. The situation seemed hopeless until the hospital executive identified the specific decision-maker at the drug firm—a foreign-trained physician with no U.S. medical experience. By exploring why this particular physician might be saying "no," they discovered several factors: he was unfamiliar with U.S. regulatory practices, he lacked respect for the mid-level project manager representing the hospital, and he might have believed the form was linked to patient enrollment success. With this understanding, they developed a strategy to have a physician from the doctor's own country explain the FDA's position. This approach addressed the decision-maker's specific concerns and cultural perspective, breaking the negotiation gridlock and allowing the project to move forward. The key insight was recognizing that the obstacle wasn't about the consent form itself but about the decision-maker's perception of authority and regulatory requirements. Research confirms that skilled negotiators spend significantly more time focusing on possible areas of shared or complementary interests than average negotiators do. In one study of professional negotiators planning for real deals, the skilled group spent 40% of their planning time exploring common ground, while average negotiators spent only 10% on this activity, focusing the remaining 90% on areas of conflict. The skilled negotiators also developed twice as many possible settlement options and tried harder to anticipate what the other side would suggest. To effectively focus on the other party's interests, follow these steps: First, identify the specific decision-maker. Companies have policies and goals, but only people negotiate. Second, look for common ground by asking how it might serve their interests to help you. An excellent technique is "role reversal"—pretending you are the other party while a colleague plays you. Third, identify interests that might interfere with agreement by asking why they might say "no." Finally, search for low-cost options that solve their problems while advancing your goals. Remember that shared interests are often hidden in seemingly adversarial situations. For example, many consumer companies have an interest in maintaining you as a satisfied customer—an interest you share with them. This gives you an opening to request accommodations. In business-to-business relationships, the same principle applies with even bigger payoffs. Companies increasingly offer long-term agreements with price guarantees, improved quality at no extra charge, and favorable financing to maintain customer satisfaction. Approach information exchange as a strategic process rather than a mere prelude to bargaining. The insights you gain during this phase often determine whether you reach an optimal agreement or leave value on the table.

Chapter 6: Create Value Through Strategic Concessions

The art of making concessions—when, how, and what to give up—often determines whether negotiations create maximum value or leave opportunities untapped. Strategic concession-making balances assertiveness with flexibility, allowing you to claim your fair share while expanding the total value available to both parties. The power of strategic concessions is illustrated by Benjamin Franklin's ingenious "meal deal" from 1722. As a sixteen-year-old apprentice in his brother James's printing shop, young Ben lived with James and took meals at a boardinghouse where James paid for their food. After reading about vegetarianism, Ben decided to stop eating meat—creating a problem since the boardinghouse cook complained about preparing special meals, and the other apprentices grumbled about Ben's "singularity." Rather than simply demanding accommodation or abandoning his principles, Franklin proposed a creative solution. He offered to stop taking meals with the others if James would give him half of what James was paying the cook for Ben's meals. Ben would then use this money to prepare his own vegetarian food. James agreed, and the arrangement proved remarkably beneficial for everyone. James saved 50% on Ben's boarding fee, the cook no longer had to prepare special meals, and Ben not only maintained his vegetarian diet but also pocketed 25% of the original fee for himself while gaining quiet time for reading and study while others were at meals. Franklin's approach demonstrates the essence of value-creating concessions. Rather than viewing the negotiation as a fixed-pie to be divided, he found a way to restructure the arrangement so everyone benefited. This "integrative bargaining" approach contrasts with simple haggling or "distributive bargaining" where parties simply divide existing value. To implement strategic concession-making in your negotiations, first distinguish between your high-priority and low-priority issues. Research shows that negotiators who make significant concessions on their low-priority issues while holding firm on high-priority ones achieve better outcomes than those who make moderate concessions across all issues. This approach requires understanding what matters most to you and to your counterpart. When multiple issues are on the table, use package bargaining rather than settling issues one by one. Present complete proposals that address all issues simultaneously, allowing you to make trade-offs between different items. Use conditional language: "IF you can give us what we need on delivery schedule, THEN we can be flexible on payment terms." This approach encourages creative problem-solving rather than positional haggling. The timing and pattern of concessions also matter significantly. In transactional negotiations where the relationship is secondary, research supports opening with an optimistic (but justifiable) position, then making a series of progressively smaller concessions. This signals that you're approaching your limit. In relationship-focused negotiations, more collaborative approaches work better, with emphasis on problem-solving rather than positional bargaining. Be careful to avoid "concession devaluation"—the tendency for people to undervalue what they receive too easily. When making significant concessions, explicitly highlight their value and ensure the other party acknowledges the sacrifice you're making. Conversely, show appropriate appreciation when receiving concessions to encourage continued cooperation. Remember that concessions are the language of cooperation in negotiation. They signal your commitment to finding a mutually acceptable solution. Even when you must bargain hard, making thoughtful, strategic concessions demonstrates good faith and keeps the process moving forward toward agreement.

Chapter 7: Close Deals with Ethical Commitment

The final stages of negotiation—closing the deal and securing commitment—often determine whether agreements survive first contact with reality. Mastering these phases requires understanding both the psychological dynamics that influence closing and the practical mechanisms that transform agreements into reliable commitments. The high-stakes closing of the RJR Nabisco deal in 1988 illustrates these dynamics dramatically. When Henry Kravis of Kohlberg Kravis Roberts (KKR) was bidding against RJR's CEO Ross Johnson in what was then the largest corporate takeover in history, the final hours became a psychological chess match. Kravis made a "final" $24 billion bid ($106 per share) and gave the RJR board only 30 minutes to decide, creating intense time pressure. Unknown to Kravis, Johnson's team had just submitted a last-minute bid of $108 per share, putting the board in a difficult position. The board sent its lawyer to negotiate an extension of Kravis's deadline. When Kravis initially refused, the board found itself caught between its legal duty to accept the highest offer and uncertainty about whether Johnson's bid was truly superior. Kravis was employing what psychologists call the "scarcity effect"—our tendency to value things more when they appear to be limited or disappearing. By imposing a deadline, he created urgency that pressured the board to act quickly. Kravis ultimately extended his deadline (for a fee of $1 million per minute) and eventually raised his bid to $109 per share, winning the contest. This case demonstrates how closing tactics like deadlines, walkouts, and ultimatums inject urgency into negotiations. While these tactics can be effective, they also carry risks. Kravis paid significantly more than his initial "final" offer because he became overcommitted to the process—another psychological factor that influences closing. For relationship-focused negotiations, softer closing techniques are more appropriate. "Splitting the difference" is perhaps the most common approach, appealing to our sense of fairness and reciprocity. When gaps are too wide to split, obtaining neutral valuations or appraisals can provide an objective basis for closing. Once agreement is reached, securing commitment becomes paramount. Commitment transforms mere agreements into reliable performance. The story of "Theresa," who ran a volunteer organization taking inner-city children on weekend outings, illustrates this principle. Theresa struggled with volunteers who agreed to help but frequently failed to show up. Her solution was ingenious: she assigned each volunteer responsibility for bringing an essential item for lunch—hamburger meat, rolls, charcoal, etc. This simple change dramatically increased attendance because volunteers now saw their contribution as necessary to the group's success. They had something concrete to lose by not showing up. This approach works because commitment is strengthened when people have something at stake. The strongest commitments include accountability mechanisms that make nonperformance costly. These range from social rituals like handshakes and public announcements to formal written contracts with specific enforcement provisions. Throughout the closing and commitment process, maintaining ethical standards is essential. While competitive tactics have their place, manipulative approaches that exploit information asymmetries or psychological vulnerabilities ultimately undermine trust and reputation. The most effective negotiators close deals firmly but fairly, creating commitments that all parties can honor with integrity. Remember that the goal of negotiation is not merely agreement but implementation. By mastering ethical closing techniques and creating robust commitment mechanisms, you ensure that your negotiated agreements translate into real-world results that stand the test of time.

Summary

Throughout this journey into mastering negotiation, we've explored the fundamental elements that transform ordinary bargainers into strategic negotiators. From understanding your personal style to setting ambitious goals, from leveraging compelling standards to building relationship capital, from exchanging information strategically to making value-creating concessions, and finally to closing deals with ethical commitment—these skills form an integrated system for negotiation success. As negotiation expert G. Richard Shell reminds us, "Effective negotiation is 10 percent technique and 90 percent attitude." This profound insight captures the essence of negotiation mastery. The techniques matter, but your mindset—your realism, intelligence, and self-respect—ultimately determines your effectiveness at the table. Take the high road in your negotiations, maintaining your integrity even when facing difficult counterparts. As you practice these principles in your daily interactions, you'll discover that negotiation is not merely a skill for special occasions but a powerful tool for achieving your goals in every aspect of life.

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G. Richard Shell

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