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Positive and Negative Bargaining Zone

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  • Category: Contract

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Describe and define the “positive bargaining zone” and the “negative bargaining zone.” “Negotiation is not a policy. It’s a technique. It’s something you use when it’s to your advantage, and something that you don’t use when it’s not to your advantage.” (Bolton) Although they do not always have a common ground, the structure of the bargaining process usually refers to having either an integrative or distributive task. This is how and why there are positive and negative bargaining zones and how they will influence or break a negotiation process.

The positive bargaining zone is the range that exists when the parties in a negotiation have reservation prices that permit an agreement to be achieved. This is a result of having overlapping stances on prices or other issues at hand. As an example of this, a seller posted an ad to sell a 2006 Ford Fusion. The listing price was for 5800, but there was no way the seller was willing to take less than $4550. A buyer approaches the seller and proceeds to negotiate. He is not willing to spend more than $6000 but wants to get it as minimal as possible, so he offers $5200. This was a positive bargaining zone because it was within the range that was acceptable as the seller. It was also in the range of payout by the buyer. With every positive, there is also a negative.

In negotiation, a negative bargaining zone exists when there is no overlapping range of prices or issues at stake, and this prohibits the negotiator from reaching satisfactory distributive outcomes. If we take the same car scenario as previously stated, but changed the man’s offer to $4400 firm, then we are in a negative bargaining zone. He’s not willing to go into the sellers range and the seller isn’t willing to budge on their price. In a forced situation, such as a bankruptcy, it’s also possible to have a resolution in the negative zone.

In a negotiation situation it is pretty clear that reaching a mutually beneficial agreement is however much easier when it comes to being in the positive bargaining zone range. Define the “bargaining surplus” and the “negotiator’s surplus. Bargaining surplus is the overlap between what the negotiation parties’ desires. This is how the positive and negative bargaining zones are identified and measured.

The zone overlap for the car sales is between $4500 and $6000. The negotiator’s surplus is what the other party missed out on. In our rolling example of the car sales, for the buyer, he has no surplus because the offer was accepted at their lowest amount willing to pay. For the seller, the surplus is $600 because the seller did not attempt to negotiate up on the buyers offer, they just settled.

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