By John Morrison M.A., CDFA
There are different types of bargaining but here I address bargaining in which all that is at issue is the monetary amount of something. Bargaining often occurs in divorce negotiations. It might be over the amount of spousal support or perhaps how much cash or other financial assets each spouse will receive in the division of assets and debts.
A key distinction is whether the bargaining is being done “as business” (between two people who each want to get the best outcome for themselves) or between two people who still care about each others' well-being and want to come up with a figure that’s reasonable and fair. In the latter, the discussion is more of an exploratory conversation than a bargaining session. Often in divorce negotiations there is an element of both.
In what follows I am discussing business-like bargaining - a form of haggling. A fancier term is distributive bargaining.
In this kind of bargaining the spouses start some financial distance apart (say one spouse wants spousal support of $1000 per month and the other offers $400) and then work toward an agreement somewhere between the two initial positions by a series of counter-offers.
People who are not used to bargaining often make mistakes in their approach to it. A common one is making an initial offer that is the worst position you will accept. In the spousal support example above, if you want $1000 but the least you’ll take is $500, some people start out requesting $500. The problem is that you have left yourself no bargaining room. The bargaining will likely proceed between the offered figure of $400 and your requested $500 and you may end up at an impasse or with less than $500.
Another common mistake is making an initial offer that you think is a good compromise. Although you’d really like $1000, let’s say you think $700 is a good middle figure so you start by suggesting $700. Again you have limited your bargaining room. The bargaining will probably proceed between the offered $400 and your suggested $700 and you could end up near the low end of your acceptable range.
Less common but also problematic is starting with an outrageous offer. Let’s say you know your spouse will be very hard pressed to pay more than $1000 per month but you request $2000. You've immediately undermined your credibility as a reasonable person and you’ve given the bargaining a bad taste. Your spouse may even refuse to proceed.
So what should you start off requesting? Something in the neighborhood of your ideal result. In the example above, maybe $1000 or $1200. You won’t be surprised if your initial request isn’t accepted. But if it isn’t, you have left yourself a lot of bargaining room. As the bargaining proceeds and you reduce what you request (and your spouse increases what they offer from the initial $400), you are able to make concessions and still be in desirable territory.
If you and your spouse get close but are still not in agreement on a figure, sometimes it works to split the difference between each of your last offers. You might also consider whether there are other concessions you could make that would help your spouse accept your last offer. An example would be offering to wait a couple months before the spousal support begins.
Do's and Don'ts
Here are some good practices for this kind of bargaining:
Consider in advance what is your bargaining range (best case and the least you’ll accept). Have good reasons (objective if possible) why this is your range;
Being willing to be flexible and compromise and let your spouse know this;
Make reasonable offers and explain why you think they are reasonable;
Ask your spouse for the reasons behind their offers and listen to what they say;
Don’t act like a bully and don’t be too timid;
If your spouse takes a strong position, be prepared to counter it with an equally strong position;
Stay calm. If things get heated, take a break;
Be willing to walk away from the bargaining if the result or the process is unacceptable to you.
There are many excellent books on the subject including Bargaining for Advantage: Negotiation Strategies for Reasonable People by G. Richard Shell.