Relative value of distributive agreement is determined based on the competitiveness of the market which negotiation is conducted about. For instance, in a market under perfect competition, where there are many buyers and sellers, prices mainly reflect supply and demand, and the parties are simply price takers, the value of distributive approach to negotiation will be trivial since any potential agreement will be at a pre-determined “market price”. Slight variance to that value will trigger failure in the negotiation. On the other hand, under conditions of monopolistic competition where number of producers or provides is very limited and uniqueness of the product or service is extremely high, there typically will be a much larger value gap between the BATNAs of parties. When the offeror’s BATNA surpasses the offeree’s, outcome of a collaborative bargaining would be very trivial. But when the offeree’s BATNA exceeds the offeror’s, distributive agreement would be highly advantageous for both parties.
As exemplified by Professor Melanie Williams, effectiveness of distributive bargaining in the market for a used Toyota Camry would not be as high as for a vintage Aston Martin. There are many buyers and sellers in the market for new Camrys and the negotiation range is likely to be very narrow since the BATNA for both parties is very close to the predetermined “market price” and the integrative approach to negotiation would be much conceivable. However, since there is not really a very active market of buyers and sellers for the vintage Aston Martin to make a narrow negotiation range compulsory, a distributive approach to negotiation would be much feasible.
There was a negotiation amo...
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...3, p. 223).
In summary, when there is a large difference between the value of the starting point and a potential negotiated arrangement and, there is diversity in terms of the relative value of these differences among the parties, integrative approach is highly favored. If either of these conditions is not present, integrative strategies would not be much valuable. Distributive method of negotiation would produce a much better outcome in the context of monopolistic competition. However, if the possible amendments to the starting point of a negotiation extensively affect the value of the outcome and are considered significant for both parties, integrative approach would be advantageous.
Note to Professor Williams: Some parts of the story regarding the “Federated Science Fund” negotiation were greatly exaggerated to better illustrate the underlying concepts.
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