The Elements of Negotiation

ELEMENT 20The Hidden Value: NegoEconomics

When individuals in an organization are driven by motivation, open-mindedness, and the freedom to explore new avenues, the potential for significant NegoEconomics emerges. NegoEconomics is the asymmetric value that is generated between your cost and my value. This is contingent upon negotiators knowing where to direct their focus. NegoEconomics effectively broadens the scope of negotiation, enlarging the “pie” that can be divided among parties.

Room for Negotiation

Traditionally, the room for negotiation is defined as the difference between the highest price a buyer is willing to pay and the lowest price a seller is prepared to accept. For a successful deal, this room for negotiation must be positive, meaning the buyer's offer exceeds the seller's minimum threshold.

For instance, if the highest price a buyer can pay is $12,500 and the lowest a seller can accept is $11,900, the $600 difference represents the room for negotiation, within which a deal is feasible.

However, the actual room for negotiation typically extends beyond this. It comprises not only the traditional room but also the additional value derived from NegoEconomics. This expanded view allows agreements to be reached even when the buyer's maximum price falls below the seller's minimum.

A Simple Model to Identify NegoEconomics

In searching for NegoEconomics, thorough preparation is crucial. Negotiators often prepare by considering the following in the offer:

• How will ...