DEFINITION of 'Negotiation'

A strategic discussion that resolves an issue in a way that both parties find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her point of view.

In advance of the negotiation, participants learn as much as possible about the other party's position and what the strengths and weaknesses of that position are, and are prepared to defend their positions and counter the arguments the other party will likely make to defend their position.

BREAKING DOWN 'Negotiation'

Many offers that people assume to be firm and final are actually flexible. For example, negotiation can be used to reduce debts, to lower the sale price of a house, to get a better deal on a car or to improve the conditions of a contract. Negotiation is an important skill when accepting a new job. Often, the employer's first compensation offer is not a company's best offer, and the employee can negotiate for higher pay, more vacation time, better retirement benefits and so on. Negotiating a job offer is particularly important because all future increases in compensation will be based on the initial offer.

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