Bargaining and Negotiations

BARGAINING AND NEGOTIATIONS

Bargaining is a type of negotiation in which the buyer and seller of a good or service dispute the price which will be paid and the exact nature of the transaction that will take place, and eventually come to an agreement. Bargaining is an alternative pricing strategy to fixed prices. Optimally, if it costs the retailer nothing to engage and allow bargaining, he can divine the buyer's willingness to spend. It allows for capturing more consumer surplus as it allows price discrimination, a process whereby a seller can charge a higher price to one buyer who is more eager (by being richer or more desperate). Haggling has largely disappeared in parts of the world where the cost to haggle exceeds the gain to retailers for most common retail items.

In almost all large complex business negotiations, a certain amount of bargaining takes place. One simplified 'western' way to decide when it's time to bargain is to break negotiation into two stages: creating value and claiming value. Claiming value is another phrase for bargaining. Many cultures take offense when they perceive the other side as having started bargaining too soon.

The Difference between Negotiation and Bargaining

Good negotiation actually either gets you to the point where you can bargain or better yet get you to the point where you don’t need to bargain at all. Bargaining is what people typically think of as haggling, point counterpoint or pushing back and forth in what many people look at as a zero sum game. Most people look at point counter point as being all that negotiation involves. What I want, what I’m unwilling to give up and what I’m willing to trade in order to get what I want.

While the terms “bargaining” and “negotiating” seem synonymous, there’s a distinct difference between the two. Bargaining involves streamlining wants and needs into a single focus. Before you ever step foot on the lawn where your neighbours’ yard sale is taking place, you know in your mind that all the hand-written sticker prices are not permanent. Your goal is to get the item you desire at the lowest price possible. Your neighbour’s goal on the other hand, is twofold—she wants to get rid of as many items as possible, and she wants to get the most amount of money for them.

Negotiation is a broader communication between two people that involves what influences the other side and what drives them. It’s asking open ended questions about what their motivations and goals are the entire communication process around bargaining. Bargaining is a small subset of negotiation. Negotiation is a much broader idea. A negotiation is really any communication between two parties where you need or want the other party to do something.