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How Negotiation Works

Haggling: Let's Dance
Most people associate negotiation with haggling the price of a used car.
Most people associate negotiation with haggling the price of a used car.
Erik Rank/Photonica/Getty Images

In its basic form, negotiation is pretty simple and probably already familiar to you, even if you've never formally engaged in it. For instance, deciding on a price for a used car or a house are typical situations in which two parties negotiate. These classic examples represent a kind of negotiation commonly known as haggling. Here, when arguing over price, negotiation entails a simple give-and-take until the parties reach a compromise or fail to agree. Skilled negotiators will often include arguments for why a price should be more or less. Here's an example of a negotiation for a used car:

Buyer: It's alright, but it has an awful lot of miles on it. I'll give you $2,000 for it.

Seller: I couldn't possibly let the car go for just $2,000 -- it's a classic. It's worth at least $6,000, but I like you, so I'll let you have it for $5,000.

Buyer: A classic? This thing is an antique and a gas guzzler; I guess I could raise my offer to $3,000, but no more.

Seller: I can see you recognize a good deal when you see it, so I'll let it go for $4,000 -- my final offer.

Of course, this tug-of-war could go on until the two parties agree on a price between $3,000 and $4,000, or they could simply never reach an agreement and give up. But this scenario demonstrates the basic formula for a negotiation:

  1. Recognizing Conflict: In the transaction, the buyer wants to spend as little as possible, while the seller wants to receive as much as possible.
  2. Stating claims: The buyer claims he deserves the car for a certain dollar amount while the seller claims he deserves more money.
  3. Conceding points: The buyer and seller make concessions by altering their claims --lowering or raising their offers -- in an attempt to reach a compromise that will satisfy both parties.

The process of negotiation appears everywhere, from arranging who will run the errands to discussing which country can continue building nuclear weapons. It's a good idea to understand the different tools you'll need to be a successful negotiator. We'll equip you with those next.