Barry Nalebuff

Adam Brandenburger

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">Idea in Brief</h4>
 <div class="ideainbrief-contents">
  <h5>The Problem</h5>
  <p>People don’t understand what’s really at stake in a negotiation. Their misconceptions make it much harder to reach an agreement.</p>
  <h5>Why It Happens</h5>
  <p>Negotiators focus on the total amount to be divided, not on the value created by an agreement. That leads to conflicting views on power and fairness.</p>
  <h5>The Solution</h5>
  <p>Recognize that the gains to be shared are the additional value the agreement creates over and above the sum of the two sides’ best alternatives. This negotiation pie should be divided equally, because both sides are equally essential to creating it.</p>
 </div>
</article-ideainbrief><p>Negotiation is stressful. A great deal is at stake: money, opportunity, time, relationships, reputations. Often that brings out the worst in people as they attempt to take advantage of the other side or try to look tough. So wouldn’t we all be better off if there was a way to treat people fairly in a negotiation and get treated fairly in return? In the following pages we’ll offer a simple, practical, field-tested approach that enables you to do just that.</p>

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<p>For decades, negotiators have been working out agreements by focusing on interests, not positions. But the messy problem of how to share the gains created by deals has remained unresolved&#8212;until now. The answer, argue Yale&#8217;s Nalebuff and NYU&#8217;s Brandenburger, lies in accurately identifying and sizing the negotiation &#8220;pie,&#8221; which they define as the <em>additional</em> value produced by an agreement to work together. It&#8217;s the value over and above the sum of the two sides&#8217; best alternatives to a negotiated agreement, or BATNAs.</p>
<p>The pie most people have in their heads, however, is the total value available to be split. Because of this, they argue over the wrong numbers and issues, taking positions that they think are reasonable but that are in fact self-interested.</p>
<p>Once the pie is properly understood, the allocation rule is simple: <em>The parties in a negotiation have an equal claim on the pie, so it should be divided evenly.</em> This is true regardless of what they can accomplish on their own, because both are equally needed to create the gains. This principle can be applied in a variety of increasingly complicated real-world scenarios, which the authors walk readers through in this article.</p>

Rethinking Negotiation

For decades, negotiators have been working out agreements by focusing on interests, not positions. But the messy problem of how to share the gains created by deals has remained unresolved—until now. The answer, argue Yale’s Nalebuff and NYU’s Brandenburger, lies in accurately identifying and sizing the negotiation “pie,” which they define as the additional value produced by an agreement to work together. It’s the value over and above the sum of the two sides’ best alternatives to a negotiated agreement, or BATNAs. The pie most people have in their heads, however, is the total value available to be split. Because of this, they argue over the wrong numbers and issues, taking positions that they think are reasonable but that are in fact self-interested. Once the pie is properly understood, the allocation rule is simple: The parties in a negotiation have an equal claim on the pie, so it should be divided evenly. This is true regardless of what they can accomplish on their own, because both are equally needed to create the gains. This principle can be applied in a variety of increasingly complicated real-world scenarios, which the authors walk readers through in this article.

Rethinking Negotiation

Summary.

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