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Definition: negotiation from The Hutchinson Unabridged Encyclopedia with Atlas and Weather Guide

Bargaining over an issue. In industrial relations, trade unions and employers are likely to negotiate the pay and conditions of workers in the process of collective bargaining. In sales, a company may bargain with another company over the price to be paid for a product, its quality and packaging, and delivery dates. If negotiations break down, it may be possible and worthwhile for the parties to seek outside help with conciliation or arbitration.

Summary Article: Negotiation from Encyclopedia of Human Relationships

Negotiation refers to the communication to reach agreement between two or more conflicting parties. Parties may be, for example, husband and wife, parent and child, colleagues in the same department, or a house owner and an interested buyer. Oftentimes, parties represent or even involve larger groups of people, as in the case of negotiation between the representatives of labor union and corporate management. In negotiation, parties perceive their interests to be opposed to those of their counterpart. Such negotiation can be formal, as in the case of unionmanagement negotiations, or more informal, as in the case of a husband and wife negotiating responsibility for household chores.

Regardless how formal or informal, negotiation involves a set of basic principles and psychological processes that will be briefly discussed in this entry. One key first element of most negotiations is that they involve, at least potentially, several issues rather than one single issue. Husbands and wives discuss responsibility for household chores and may discuss income and child care. Unions and management discuss wages as well as health care, pension plans, vacation time, and training and development. In short, negotiations often concern multiple issues, and in case they do not, parties can bring new issues to the table, or break issues into several smaller ones.

Creating Value in Negotiation

Negotiating about several issues at the same time can have interesting advantages. A famous story is told by a pioneering scholar of negotiation, Mary Parker Follett, about two sisters quarreling over an orange, who end up splitting the orange in two equal parts. One sister squeezes her part, throws away the peel, and drinks the juice. The other squeezes her half, throws away the juice, and grates the peel to flavor a cake she is baking. Had these sisters talked about their interests they could have reached a mutually more beneficial agreement (the entire peel to one sister, all the juice to the other) than they reached by quarreling over one single issue—the orange.

Another illustration of the benefits of discussing multiple issues comes from the Camp David negotiations between Israel and Egypt in 1977. Since the Yom Kippur war in 1973, Israel had occupied the Sinai Desert, which Egypt wanted back. Instead of dividing the desert in more or less equal parts, it was decided that Egypt would get back the desert to satisfy its historical claims and restore its reputation in the Arab world. But, critically, Egypt would keep the desert demilitarized so that Israel's need for security was satisfied. Both parties thus achieved a better deal by talking about reputation as well as about security, rather than focusing on the single surface issue of who gets what part of the Sinai Desert.

Agreements that take advantage of the fact that the various issues involved in a conflict may not be equally important to all parties are called integrative agreements. In integrative agreements, parties concede on issues that are unimportant to oneself but important to the other (e.g., the peel, reputation among Arab neighbors) but stand fast on issues that are important to oneself but unimportant to the other (e.g., juice, security). Compared with simple “split-the-difference” compromises or victory-to-one settlements, studies have shown that integrative agreements tend to be relatively stable, create positive feelings of satisfaction and pride, and install a sense of self-efficacy, allowing parties to approach later negotiations in a more optimistic, problem-solving oriented manner. In addition, parties are more committed to their part of the bargain and more motivated to honor their promises. Integrative agreements create more value to both parties than any other type of agreement. This in turn fosters stability, harmony, and sometimes even economic prosperity; failure to reach (integrative) agreements may create frustration and conflict, distrust and weakened social ties, and may hurt economic progress. In the long run, failure to agree and continue conflict may lead to relationship dissolution (e.g., divorce, employees leaving an organization).

Psychological Principles in Negotiation

Many scholars in psychology and other social sciences have tried to understand when and why people fail or succeed in reaching integrative agreements. Pioneering work was done by Sidney Siegel and Lawrence Fouraker, Harold Kelley, and Dean Pruitt, among others. These authors created experimental situations in which two persons negotiated over several issues (e.g., the price of the car, delivery time, method of payment), some of which were valuable to the seller but not to the buyer, and some of which were not valuable to the seller but were important to the buyer. By trading the less important issue for the more important one, buyer and seller were able to earn more personally and collectively than by splitting the difference on these issues. But because each party entered the negotiation without knowing what was valuable or not to the counterpart, they were unaware of the possibility to trade off and do well collectively—they had to uncover this possibility through negotiation. This is exactly what the researchers were interested in: Why do some individuals discover the integrative possibilities and others do not?

This pioneering work showed that individuals and groups have great difficulty achieving integrative agreements. According to a structural-motivational account, this is primarily because negotiators simultaneously face a cooperative incentive to reach agreement with their counterpart (i.e., agreement is better than no agreement) and a competitive incentive to do well personally. Whereas cooperative incentives motivate negotiators to make and reciprocate concessions, to lower their demands, and to exchange information openly and accurately, competitive incentives motivate them to withhold and retract concessions, to remain tough in their demands, and to deceive and mislead their counterpart. By implication, if cooperative incentives become relatively more important and available than competitive in cen tives, negotiators will engage in more cooperative behavior and are less likely to reach a mutually harmful stalemate.

Cooperative incentives gain or lose prominence relative to competitive incentives because of aspects of the negotiation setting. Power is one example. When a negotiator has a good alternative to the current negotiation (e.g., someone else already made an attractive offer), this may fuel the competitive incentive to increase personal outcomes from the negotiation. Or when a negotiator has a punitive capacity, as in international conflicts where some countries have bigger armies than others, such power preponderance may induce a tough stance to elicit concessions from the other, rather than making concessions oneself. Put differently, when power increases relative to one's partner, negotiators generally become reluctant to make and reciprocate concessions. When power is less than that of one's counterpart, the motivation to cooperate and concede increases. Especially when concessions are made on issues that are important to the low-power party, the likelihood of reaching integrative agreement is reduced.

Another factor influencing the balance between cooperative and competitive incentives is time pressure. Time pressure may emerge because the goods (e.g., fish or fruit) that are being negotiated may deteriorate, or because an external or self-imposed deadline is approaching (e.g., the market closes at 5 PM; divorce papers are being filed and take effect soon). Time pressure focuses parties on agreement and, in general, fosters concessions and cooperative exchange. Again, if time pressure fosters concessions on important issues, the likelihood of reaching integrative agreement is reduced.

When negotiators operate on behalf of a constituency, as when a small group of workers negotiates on behalf of a union, they need to consider their own (and perhaps their counterpart's) needs and desires, as well as those of their constituents. Research has shown, for example, that negotiators tend to comply with their constituents' desires— when the constituents take a competitive stance toward the other side, representatives negotiate more competitively than when their constituents are eager for an agreement. Interestingly, there is considerable evidence that when constituent goals and desires are unknown or unclear, negotiators tend to assume they should compete rather than cooperate. The mere fact that an individual represents one or more others generally increases toughness and competitive behavior.

Dual Concern Theory

Bargaining strength, time pressure, and accountability to constituents all lead negotiators to focus on their own outcomes and resist making concessions. Other variables have been shown to influence the extent to which negotiators are mindful of the outcomes of their counterpart. For example, when negotiators are friends or spouses, they may be particularly concerned about their counterpart's outcomes, so they won't jeopardize their relationship. Or when negotiators expect to work together in the future, they are more motivated to search for an agreement that satisfies their counterpart. Dual Concern Theory, developed by Dean Pruitt and Jeffrey Rubin, summarizes these tendencies among negotiators. When concern for own outcomes is high (e.g., there is high power) and concern for other's outcomes is low (e.g., one does not expect to work together in the future), negotiators engage in tough, competitive behavior aimed at dominating the partner. They are reluctant to make concessions, and do not consider others' demands and needs. When concern for own outcomes is low (e.g., time pressure is high) and concern for others' outcomes is high (e.g., the other is a friend), negotiators engage in conciliatory behavior aimed at pleasing the partner. They are willing to make (unilateral) concessions, and cater to the others' demands and needs. When parties engage in mutual force—when each has high concern for own outcomes and low concern for their partner—the negotiation is likely to end in a mutually harmful stalemate, and integrative agreements are unlikely. Likewise, when parties engage in mutual yielding—when each has low concern for own outcomes and high concern for the partner's outcomes—the negotiation is likely to end in a quick, fifty-fifty compromise. Again, integrative agreements are unlikely. The theory predicts that integrative agreements come about when each party has a high concern for both own and other's outcomes. In this situation, negotiating parties resist making concessions because doing so hurts personal interests but they want to make concessions to help the other's interests. This dilemma leads negotiators to search for creative solutions that integrate both own and other's interests optimally.

Bounded Rationality in Negotiation

Dual Concern Theory is all about motivation and not about the cognitive underpinnings of integrative negotiation. Cognition and information processing are, however, critically important in negotiation. Individuals cannot process all relevant information—they are bounded in their rationality because cognitive ability is limited, and not all relevant information is or can be made available. Also, negotiators may try to mislead and deceive each other, and thus, some of the available information is deliberately inaccurate and cannot be trusted. To deal with this cognitively taxing task, negotiators tend to rely on cognitive heuristics—mental shortcuts that help them make fast and satisfactory judgments and decisions. Thus, negotiators may act on the basis of stereotypes—union representatives may assume management representatives are reluctant to give raises, much as management representatives may assume that union representatives are unaware of macro-economic developments and increasing competition.

Max Bazerman and Maggie Neale developed their Behavioral Decision Approach, in which they discuss many of these cognitive shortcuts and how they affect the likelihood of integrative agreements. An example is the “fixed-pie” assumption—at the outset, negotiators tend to assume that what is important to them (e.g., juice, in the orangesharing example) is equally important to the other party, and what is irrelevant to them (e.g., peel) is equally irrelevant to the other. Given the fixed-pie assumption, it makes no sense to search for an integrative agreement; all a negotiator can do is to try to get the biggest share of the pie (or orange). And this is indeed what has been found many times: Most negotiators, novices and experts alike, tend to begin with a fixed-pie assumption and search for victory or, when fairness concerns prevail, fifty-fifty compromises. Only when negotiators realize that their fixed-pie assumption is erroneous do they start searching for integrative agreements.

Levels of Information Processing

Recent studies have invoked the notion that negotiators may switch between more automatic information processing—in which case relying heavily on cognitive heuristics—and more systematic information processing. Under systematic information processing, the influence of cognitive heuristics attenuates and negotiators are more likely to reach integrative agreements. Negotiators engage in more systematic information processing when they have low rather than high power, when time pressures are mild rather than intense, and when they are held accountable. These and other factors thereby help negotiators achieve more mutually beneficial, integrative agreements. Taken together, the combination of high concern for own outcomes, high concern for others' outcomes, and a willingness to engage in deep and deliberate processing of information appears to be the optimal mix to arrive at mutually beneficial, integrative agreements.

See also

Communication, Norms and Rules, Conflict Resolution, Fairness in Relationships, Group Dynamics, Interdependence Theory, Mediation, Marriage Dissolution, Power Distribution in Relationships, Reciprocity, Norm of

Further Readings
  • De Dreu, C. K. W., Beersma, B., Steinel, W., & Van Kleef, G. A. (2007). The psychology of negotiation: Principles and basic processes. In Kruglanski, A. W. & Higgins, E. T.(Eds.), Handbook of basic principles in social psychology (2nd ed., pp. 608-629). New York: Guilford Press.
  • Thompson, L. L., & Brett, J. M.(Eds.). (2006). The social psychology of negotiation. New York: Psychology Press.
  • De Dreu, Carsten K. W.
    Copyright © 2009 by SAGE Publications, Inc.

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