Distributive bargaining is a negotiation strategy used in business and labor negotiations to allocate benefits or resources between parties. It differs from integrative bargaining, which focuses on mutual benefit. Examples include labor negotiations and business-to-business negotiations for discounted prices. Both parties make concessions to reach a compromise.
Distributive bargaining is a type of strategy that is sometimes used in business negotiations, including labor negotiations. The general idea is to determine a specific plan for allocating benefits or resources between the two parties, when the two parties are not in agreement on how to organize the distribution. Sometimes known as loss-making or loss-making negotiations, both parties will try to secure as many available assets as possible, although concessions are necessary for each party before the bargaining can conclude.
The distributive bargaining process is somewhat different from a strategy known as integrative bargaining. With the latter, the focus is on identifying resources that can be cultivated to the mutual benefit of both parties, ultimately allowing each party to benefit from an allocation in line with the originally desired amount. The module focuses more on the immediate division of resources, with no attempt to increase those resources and organize a distribution later. A distributive bargaining approach means that there is no chance for either party to ultimately receive everything they want, resulting in gains and losses for all involved.
A common example of distributive bargaining is found in labor negotiations. In this scenario, a union will seek to secure certain resources such as better pay, better working conditions, and additional benefits for union members. Employers will seek concessions from unions, often with changes to employee contracts that help support the business‘ ongoing operations. To come to terms, union negotiators can give employers a few points in exchange for guaranteeing at least some of the desired additional benefits for union members. While neither party gets everything they want, some gains are made which help make losses easier to manage.
The general idea of distributive bargaining can also apply to business-to-business negotiations. For example, a business may seek to secure discounted prices from a supplier. The seller may be willing to provide a type of discounted price that is close to what the customer wants, but requires the customer to enter into some sort of volume purchase agreement that serves as a commitment to purchase a certain number of goods and services over time frame covered by the contract. As a result, the customer receives a rate that is somewhat close to the desired level, while the salesperson earns less from individual sales, but risks offsetting some of that loss that the volume commitment owns.
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