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 the allocation of benefits or resources between the two parties, when the two parties are not in harmony on how to arrange the distribution. Sometimes known as win-lose or zero-sum negotiations, both parties will seek to secure as much of the available assets as possible, although concessions are necessary for each party before the bargaining can come to a close.
The process of distributive bargaining is somewhat different from a strategy known as integrative bargaining. With the latter, the focus is on identifying resources that can be grown to the mutual benefit of both parties, ultimately allowing each party to enjoy an allocation that is in line with the amount originally desired. The form focuses more on dividing resources immediately, without any attempt to grow those assets and arrange for a distribution at a later date. A distributive bargaining approach means there is no opportunity for both sides to eventually receive everything they want, resulting in gains and losses for everyone concerned.
One common example of distributive bargaining is found with labor negotiations. In this scenario, a labor union will seek to secure certain resources such as better pay, improved working conditions, and additional benefits for union members. Employers will seek to secure concessions from the unions, often with changes in employee contracts that help to support the ongoing operation of the business. In order to come to terms, the union negotiators may concede some points to the employers in exchange for securing at least some of the desired additional benefits for union members. While neither side receives everything desired, some gains are made that help to make the losses easier to manage.
The general idea of distributive bargaining can also apply to negotiations between businesses. For example, a company may seek to secure discounted pricing from a vendor. The vendor may be willing to provide some type of discounted pricing that is close to what the client wants, but require that the customer sign some sort of volume purchase agreement that serves as a commitment to purchase a certain number of goods and services within the time frame covered by the contract. As a result, the client receives a rate that is somewhat near the desired level, while the vendor makes less money from individual sales but is likely to make up some of that loss owning to the volume commitment.
