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.