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November 29, 2014

Leverage (negotiation)

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In negotiation, leverage is a measure of which side, at any given moment, has a greater ability to influence the other side.

Types of leverage include positive leverage, negative leverage, and normative leverage.

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[edit] Normative Leverage

Normative leverage is the application of general norms or the other party's standards and norms to advance one's own arguments for one's own good. For example, you have normative leverage when your negotiating opponent says that he only pays Blue Book value for cars and you show him that the Blue Book value is the amount you are charging.

[edit] Positive Leverage

Positive leverage is a negotiator's ability to provide things that his opponent wants. For example, you have positive leverage when your negotiating opponent says, "I want to buy your car".

[edit] Negative Leverage

Negative leverage is a negotiator's ability to make his opponent suffer. For example, you have negative leverage if you can threaten your negotiating opponent: "If you don't fulfill your commitment to me, I will ruin your reputation."

Negative leverage is an option of last resort for most negotiators, it is the "nuclear option".

[edit] Buyer leverage

Buyer leverage is the amount of bargaining power that buyers have when purchasing goods and services.

The amount of buyer leverage relative to the bargaining power and leverage of the seller depends on the information that seller and buyer have about the product, the relative scarcity or abundance of the product, the availability of product substitutes, and many other factors. The relative leverage of buyers and sellers determines the price and terms of transactions and the nature of business relationships.

For instance, business procurement managers often use their past purchase histories to get better deals from sellers vying for their business.

[edit] See also

[edit] External links