Concession (in Negotiation)

When should you offer something to another party when negotiating, how much should you provide, and in what manner should you do so? These are primary questions in the area of concession in negotiations.

In any type of negotiation, a concession is something that you provide to another party when trying to come to a mutually agreeable deal. Typically, two or more parties approach a negotiation with a list of interests—issues they wish to receive from the other parties involved. These can be tangible goods such as money, raw materials, or finished products. They may also be intangible items such as a confidentiality agreement, information exchange, or even an apology.

Concessions are essential for any negotiation to be successful. Consider a simple barter negotiation over the price for a piece of art. The seller wishes to trade the item for as much as possible, while the buyer wants to spend as little as possible. Their opening offers may be far apart, thus a series of concessions over price will be necessary to come to a deal. The seller comes down in price while the buyer comes up, but where they ultimately end is a product of the concessions offered by each party. If neither party concedes on price, or if the concessions are inadequate to bridge the gap between the opening offers, then no deal is possible.

In a more complex negotiation, the mix of concessions across multiple issues is critically important. Many negotiations involve several issues, and those issues may be of different importance to each party. For example a job candidate may wish to negotiate over salary, benefits, and vacation days, but she might care more about vacation days than benefits. Conversely, a job recruiter may also wish to negotiate over those same issues, but he may be more concerned about benefits than vacation days. In such a case, negotiators should look for differences in the intensity of preferences in order to concede on items that matter to one party more than another. In addition, such concessions should not be made on individual items one at a time; rather negotiators can make package concessions. In a package concession, a negotiator will offer more or less of multiple items at once, allowing them to use the mix of issues to work toward a deal of mutual value.

The dynamics of concessions are very important in simple or complex negotiations. One example is bilateral versus unilateral concessions. A bilateral concession is when both parties in a negotiation concede something to the other in alternating turns. For example the seller of the piece of art reduces the price slightly followed immediately by the buyer increasing her offer slightly. In contrast, negotiators should be wary of unilateral concessions, where one party adjusts his offer multiple times before the other party makes any concessions. This creates a power imbalance and sends dangerous signals about the resources and skills available to the party making such concessions.

Concession size is also very important. The size of a concession sends an important signal to the other party about willingness to move any further. Utilizing decreasing concession size sends a signal to the other party that you are reaching your reservation point—the lowest or highest you'll go. In contrast, offering consistent concession increments may signal to the other party that you are willing to continue conceding well beyond the current offer. Typically, a negotiator will start with a modest concession, then increasingly [Page 362]cut the size of future concessions to signal when they can go no further.

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