Handicap System in Negotiations
Negotiate with handicaps
The handicap system in negotiations refers to the idea that each side's cost of waiting determines how the pie will be split. The party with the lower cost of waiting has an advantage in the negotiation. This framework generalizes to include negotiations with no predetermined last period and can be applied to various scenarios, such as union-management bargaining and business negotiations.
- The cost of waiting determines the split of the pie.
- The party with the lower cost of waiting has an advantage in the negotiation.
- The handicap system can be applied to various scenarios, including union-management bargaining and business negotiations.
- Determine the cost of waiting for each sideCalculate the cost of waiting for each side, including any outside income possibilities or alternative options.Pro tipConsider the time value of money and the potential consequences of delayed agreement.WarningFailing to accurately determine the cost of waiting can lead to an unfavorable negotiation outcome.
- Apply the handicap systemUse the cost of waiting to determine the split of the pie, with the party having the lower cost of waiting having an advantage in the negotiation.Pro tipBe prepared to negotiate and make concessions to reach a mutually beneficial agreement.WarningFailing to apply the handicap system can lead to an unfair or unfavorable negotiation outcome.
In a union-management bargaining scenario, the union's cost of waiting is $300 per day, while the management's cost of waiting is $500 per day. Using the handicap system, the union would have an advantage in the negotiation.
The concept of the handicap system in negotiations is rooted in game theory and has been applied to various real-world scenarios, including union-management bargaining and business negotiations. The idea is that each side's cost of waiting determines how the pie will be split, with the party having the lower cost of waiting having an advantage in the negotiation.