Prospect Under Pressure – Win-Lose Scenarios and The Impact of Deadlines In Renegotiations

Authors:

Abstract: In B-to-B negotiations, deals are usually closed only when all parties can benefit from an agreement ("win-win"). However, there are situations where negotiating becomes necessary even though an agreement might result in potential losses for at least one of the parties involved. This is true, for example, in renegotiations. Companies make extra demands, or claims, when changing market conditions, such as higher material costs, render the original agreement unprofitable for them. In such scenarios, the negotiating parties face competing outcomes. While one party (the claimant) wants to enhance its position relative to the current contract, the other party (the claim receiver) seeks to limit the degradation of their contractual position ("win-lose"). Given the impending consequences, these contract adjustments need to be negotiated as quick as possible. Otherwise, the disadvantaged party may no longer be able to offer the initially agreed-upon service, for example, due to a lack of financing for manufacturing materials. Therefore, the aim of this paper is to investigate how renegotiations ("win-lose") proceed under time pressure. For this purpose, an experiment with trained negotiators is conducted (n=205). Initial results indicate that claim recipients achieve better negotiation outcomes than claimants. At the same time, the presence of a deadline positively affects the willingness to compromise (number of concessions) of both negotiating sides but reduces the integrative exploitation of the negotiation issues.

Track: DEC

Keywords: business-to-business negotiation, renegotiation, win-lose scenario, loss aversion, time pressure, experimental design