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What is Distributive Bargaining? - Definition & Examples

What is Distributive Bargaining? - Definition & Examples
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  • 0:00 Distributive Bargaining
  • 1:00 The Classic Scenario
  • 1:39 How You Can Be the Winner
  • 3:12 Lesson Summary
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Lesson Transcript
Instructor: David Whitsett

David has taught computer applications, computer fundamentals, computer networking, and marketing at the college level. He has a MBA in marketing.

When two competitive people negotiate over how to split a pie, there's usually a winner (bigger piece) and loser (smaller piece). In this lesson, we'll examine the use of distributive bargaining in negotiations and provide examples.

Distributive Bargaining

Distributive bargaining describes a scenario where two parties are trying to divide up a fixed resource, usually in a competitive fashion. They go back and forth until there is a final solution with a winner, who claimed the most value, and a loser, who got less value. That's why this form of bargaining is thought of as a win-lose situation or zero-sum game. Many wins have to be balanced by your losses or vice versa.

In contrast to distributive bargaining is integrative bargaining. Instead of thinking only of dividing the proverbial pie, integrative bargaining seeks to expand the pie so everybody can get enough. This is a more cooperative style of bargaining because the desired outcome is greater than what either party could get on their own. Integrative bargaining is often used in families and in business situations where a long-term relationship is important.

The Classic Scenario

Car buying is a classic example of a distributive bargaining situation. Why? When we walk into a dealership, chances are we're going to work with somebody we've never met before and likely will not see again. So the relationship aspect is not important, but getting a great deal is. On the other side of the bargain is the car salesperson, whose main job is to make the best possible deal for their employer. Even though things may be friendly on the surface, this type of bargaining is somewhat adversarial by nature. Most people are somewhat wary of a car salesperson, and the car salesperson is highly trained to extract your dollars.

How You Can Be the Winner

Let's now look at some distributive bargaining tactics and apply them to car buying. One important thing to consider is your walk away value, or the most you're willing to pay for the vehicle. Anything above that number and you walk away from the table. The salesperson has a walk away value too; the minimum price the dealership will allow for the vehicle. The bargaining zone should exist somewhere between those two numbers.

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