Conventional wisdom says that you should never leave money on the table when negotiating. But research in my field suggests this could be exactly the wrong approach.
There’s mounting evidence that a short-term win at the bargaining table can mean a loss in terms of overall trust and cooperation. That can leave everyone – including the “winner” – worse off.
As a former executive, I’ve managed large contracts as both a buyer and a seller. Now, as a business professor, I study these trading partner relationships, exploring what works in practice. My work supports what economic theorists and social scientists have been arguing for years: The best results come when people collaborate to create long-term value instead of fighting for short-term wins.
What game are you playing?
Research into art, science and practice of collaborative approaches dates back to the 1940s when the mathematician John von Neumann and economist Oskar Morgenstern used mathematical analysis to model competition and cooperation in living things.
Interest in collaborative approaches grew when researchers John Nash, John C. Harsanyi and Reinhard Selten won a Nobel Memorial Prize in Economic Sciences in 1994. Their work inspired academics around the world to delve deeper into what’s known as game theory.
Game theory is the study of the outcome of strategic interactions among decision makers. By using rigorous statistical methods, researchers can model what happens when people choose to cooperate or choose to take an aggressive, power-based approach to negotiation.
Many business leaders are taught strategies focusing on using their power and playing to win – often at the other party’s expense. In game theory, this is known as a zero-sum game, and it’s an easy trap to fall into.
Conventional wisdom says that you should never leave money on the table when negotiating. But research in my field suggests this could be exactly the wrong approach.
There’s mounting evidence that a short-term win at the bargaining table can mean a loss in terms of overall trust and cooperation. That can leave everyone – including the “winner” – worse off.
As a former executive, I’ve managed large contracts as both a buyer and a seller. Now, as a business professor, I study these trading partner relationships, exploring what works in practice. My work supports what economic theorists and social scientists have been arguing for years: The best results come when people collaborate to create long-term value instead of fighting for short-term wins.
What game are you playing?
Research into art, science and practice of collaborative approaches dates back to the 1940s when the mathematician John von Neumann and economist Oskar Morgenstern used mathematical analysis to model competition and cooperation in living things.
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