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Week 19: Zero- vs Positive-Sum

Who gets what share of the pie and what's the best negotiation strategy?

 

What is zero- vs positive-sum?

Zero- and positive-sum situations can be framed as ‘games’ involving the size of a pie, and how that pie is distributed (for example, land, profit, timeshare of a condo, or political power).

In a zero-sum game we’re fighting over how the pie is distributed. It’s impossible for someone to advance their position without the other person losing out. If one side gets $1,000 more, that means the other side gets $1,000 less: the gains and losses add up to zero. In a zero-sum game, a rational actor seeking the greatest gain for himself or herself will necessarily be seeking the maximum loss for the other actor.

In positive-sum games we’re adding to the size of the pie, meaning there are more spoils for everyone to share. So it’s possible for everyone to benefit in a “win-win situation”.

Examples of zero- vs positive-sum games

Good negotiating is working out how to grow the size of the pie for everyone, not just fighting over who gets what (so-called ‘distributive bargaining’). This shift in mindset fosters trust (crucial for negotiating), helps you look for ‘win-wins’, and decreases the likelihood the deal will die on the table.

A couple getting a divorce can try, instead of fighting to get the better of the other while lining their lawyers’ pockets, to keep as much money for the two of them (and out of the billable hours of the lawyers) as possible.

The outcomes of immigration and the economy is positive sum because immigration also increases the number jobs available in an economy, and the evidence shows that if we let refugees in and allow them to work it will drastically improve their standard of living while at least maintaining (and possibly increasing) natives’ standard of living. See the lump of labor fallacy.

Similarly, international trade doesn't benefit one country to the detriment of the other - it benefits them both. For this reason, we would all be better off turning away from protectionism to open economies, which make everyone richer and discourage war.

Also check out

  1. Negotiating the Best Deal, The Great Courses (which could probably be downloaded from somewhere for free, not that I’m condoning that)

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