Negotiation

Negotiation is a dialogue between two or more parties aimed at resolving differences, securing an advantage for one side or a group, or reaching outcomes that meet various interests. The goal is to find agreement on matters of shared concern, and the resulting deal may benefit all or only some participants. To improve their chances of closing deals, avoiding conflicts, building relationships, or maximizing mutual gains, negotiators should clarify their own needs and wants while also trying to understand those of others. A key factor in success is the level of trust between parties that the negotiated solution will be carried out. People negotiate daily, often without realizing it, in settings such as businesses, nonprofits, governments, sales, legal cases, and personal matters like marriage, divorce, parenting, or friendship. Professional negotiators—including union negotiators, leverage buyout specialists, peace negotiators, and hostage negotiators—often work under titles like diplomat, legislator, or arbitrator. Negotiations can also be conducted by algorithms or machines in automated negotiation, which requires correct modeling of participants and process.

The word "negotiation" comes from early 15th-century Old French *negociacion*, from Latin *negotiatio*, based on *neg-* ("no") and *otium* ("leisure"), originally meaning "business, trade, traffic." By the late 1570s, it had taken on the meaning "to communicate in search of mutual agreement," shifting from "doing business" to "bargaining about" business.

Negotiation takes various forms, such as UN conferences to set international norms, meetings between combatants to end conflict, business meetings to complete transactions, or conversations between parents on childcare. Mediation involves a third party helping conflicting parties negotiate when they cannot do so alone, contrasting with arbitration, where parties commit to accepting a third party’s decision. Workplace negotiations can affect an entire organization’s performance. Theorists generally distinguish two primary types: distributive and integrative negotiation, depending on the negotiators’ mindset and the situation. One-off encounters without lasting relationships tend toward distributive negotiation, while ongoing relationships often require integrative negotiation.

In distributive negotiation (also called win-lose, compromise, positional, or hard-bargaining negotiation), the total benefits and drawbacks are seen as a "negotiation pie." The pie can grow, shrink, or stay the same. If parties expand the pie, a win-win outcome is possible, but this is often hindered by the "small pie bias" (underestimating the pie’s size) or the "incompatibility bias" (underestimating the chance to enlarge it). The pie may also shrink due to excessive negotiation costs. Distributive negotiation operates under zero-sum conditions, assuming one party’s gain is another’s loss—for example, haggling over a car or home price. Each side typically takes an extreme position they know won’t be accepted, then concedes as little as possible. This form often involves people with no prior relationship and little expectation of future interaction, though all negotiations have some distributive element. Because prospect theory shows people prioritize avoiding losses over gaining benefits, distributive negotiation tends to be more contentious and less productive.

Integrative negotiation (also called interest-based, merit-based, win-win, or principled negotiation) uses techniques to improve the quality and likelihood of agreement by recognizing that parties often value different outcomes differently. Unlike distributive negotiation’s fixed pie, integrative negotiation seeks to create value—"expand the pie"—through trade-offs or logrolling, where one item’s loss is compensated by gains from another.