Finite vs Infinite game in negotiations. “Negotiations without leverage is just asking for a favor”.
Most times when I enter negotiations whether with a supplier, CEO, provider, or anyone for that matter I tend to look at the negotiation with the view of finite vs infinite game theory. As a negotiator I am generally in the realm of the finite game, I have specific boundaries and outcomes I am working with. If the opposite is true for the other party and they are in infinite game, it is warning sign that we are not aligned in the game and a switch in tactics may be warranted. This is not to say that I exit the negotiations. It is a signal that I need to bring the other party into finite game. Remember the importance of relevance.
The task becomes making the negotiations relevant to the other side. Many times, by finding what creates relevance for the other side we can shift us both back into the finite game.
The best example I can give is when approaching suppliers for cost downs. I have seen a common practice of approaching supplier using an antagonistic manner asking for a cost down. If you are not holding some measure of leverage this will normally throw both parties into infinite game where no real gain can be obtained. Consider making sure you have identified your specific parameters and understand the other parties’ relevant parameters. You can leverage: spend size, relationships, value add, technology, and growth proposals. If, however you intend to leverage negative consequences such as changing suppliers, ensure you’re able and willing to follow through. Remember that relevance is well.. relative.
“Negotiations without leverage is just asking for a favor”.