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Price negotiation is not zero sum. Zero sum means one party’s gain is exactly equal to the other party’s loss. Most deals are positive sum - both parties get b

Price negotiation is not zero sum. Zero sum means one party’s gain is exactly equal to the other party’s loss. Most deals are positive sum - both parties get benefits. Price negotiation is about the seller getting some the upside of the buyer’s benefits but not so much that it sucks for the buyer and not so low a price that the seller will walk. Some deals are inherently negative sum - if you bought a lemon.

Chris2048 8y ago
If I pay a dollar more for the same thing, I, the buyer, lose a dollar, and the seller gains a dollar. Can you explain how that's not zero-sum?
- parasubvert 8y ago
  Ok, here goes First, Not everything is a commodity with perfect substitutes, arguably most things aren’t. Substitutability goes beyond price. Secondly, benefits are not necessarily equal or a linear function of cost. Third, whether a game is zero, positive, or negative sum requires a look at the costs/benefits of the whole transaction. Saying that a buyer gains $1 more if the price goes up is obvious, it that doesn’t necessarily make it zero sum when you look at the overall transaction of a $1 price raise. . Zero sum implies that price, costs and benefits are equal. I spend $20 on a product that cost you $20 to make, and I get $20 of benefits out of it. Whereas I buy something for $20 , it cost you $5 to make, and I got benefits of $100 out of it, that’s positive sum, as both the buyer and seller got positive gain. If you raise the price, the deal isn’t as great, but it’s not zero sum.
- Gibbon1 8y ago
  If one thing if you are haggling over a used toaster at a yard sale. It's another when you are negotiating a business relationship where the success of both parties is important. A contract with a supplier doesn't do you any good if the terms are so bad it cripples their ability to execute. That highlights a beef I have with economics. Failure to understand that business relationships are exactly that. You can't model them using the sorts of time invariant non-network models they use.
  - Chris2048 8y ago
    If you are "negotiating a business relationship" you aren't necessarily haggling on price, but service. This is why I mentioned "the same product"
    - Gibbon1 8y ago
      'The same product' is fleeting and ethereal over the long term.
      - Chris2048 8y ago
        Yet in the context given, it's timeless and relevant..
Gibbon1 8y ago
There is such a thing as negotiating too hard on price. The deliverables have lower cost to benefit than if you paid more money. Or worse no deliverables. Worse than that fatal realized liabilities. I worked with a group that designed telcom IC's. One of our customers developed a new product. Which then failed in the field. The parent company had to issue a recall. Destroyed all remaining inventory and canceled the product. All because someone jacked the microphone supplier down about 5 cents on a part.

Chris2048 8y ago

If I pay a dollar more for the same thing, I, the buyer, lose a dollar, and the seller gains a dollar. Can you explain how that's not zero-sum?

parasubvert 8y ago
Ok, here goes First, Not everything is a commodity with perfect substitutes, arguably most things aren’t. Substitutability goes beyond price. Secondly, benefits are not necessarily equal or a linear function of cost. Third, whether a game is zero, positive, or negative sum requires a look at the costs/benefits of the whole transaction. Saying that a buyer gains $1 more if the price goes up is obvious, it that doesn’t necessarily make it zero sum when you look at the overall transaction of a $1 price raise. . Zero sum implies that price, costs and benefits are equal. I spend $20 on a product that cost you $20 to make, and I get $20 of benefits out of it. Whereas I buy something for $20 , it cost you $5 to make, and I got benefits of $100 out of it, that’s positive sum, as both the buyer and seller got positive gain. If you raise the price, the deal isn’t as great, but it’s not zero sum.
Gibbon1 8y ago
If one thing if you are haggling over a used toaster at a yard sale. It's another when you are negotiating a business relationship where the success of both parties is important. A contract with a supplier doesn't do you any good if the terms are so bad it cripples their ability to execute. That highlights a beef I have with economics. Failure to understand that business relationships are exactly that. You can't model them using the sorts of time invariant non-network models they use.
- Chris2048 8y ago
  If you are "negotiating a business relationship" you aren't necessarily haggling on price, but service. This is why I mentioned "the same product"
  - Gibbon1 8y ago
    'The same product' is fleeting and ethereal over the long term.
    - Chris2048 8y ago
      Yet in the context given, it's timeless and relevant..

Gibbon1 8y ago

There is such a thing as negotiating too hard on price. The deliverables have lower cost to benefit than if you paid more money. Or worse no deliverables. Worse than that fatal realized liabilities. I worked with a group that designed telcom IC's. One of our customers developed a new product. Which then failed in the field. The parent company had to issue a recall. Destroyed all remaining inventory and canceled the product. All because someone jacked the microphone supplier down about 5 cents on a part.