What Is Brinkmanship?
Brinkmanship is a negotiating technique where one party aggressively pursues a set of terms so that the other party must either agree or disengage. Brinkmanship (or "brinkpersonship," or less commonly, "brinksmanship") is so named because one party pushes the other to the "brink" or edge of what that party is willing to accommodate. As a negotiation strategy, brinkmanship is often used by companies and union negotiators in labor negotiations and stoppages (or strikes), by diplomats, and by business people looking to get a better deal.
- Brinkmanship is a negotiating strategy that involves making a set of demands and sticking to them, even at the risk of losing the deal entirely.
- Brinkmanship can be used to gain more advantageous terms in a business deal, but risks alienating counterparties.
- Market structure, existing economic relationships, available alternatives, and timing are factors to consider in choosing whether to engage in brinkmanship.
At its core, brinkmanship is seeking success in a negotiation by being unreasonable. The rewards from brinkmanship are potentially greater than in a more amiable negotiation since the more aggressive party is likely to gain better terms if their strategy is successful. Companies or individuals pursuing a brinkmanship approach to negotiating may do it as a bluff; they might be willing to accept more equitable terms but want to see if they can have it entirely their way first. In politics and diplomacy, brinkmanship involves two parties allowing a dispute to progress to the point of near-disaster before a negotiated solution is even considered or discussed. In effect, it is like playing "chicken" to see which party will back down first.
Brinkmanship is as controversial as it is risky. While it may occasionally yield more favorable terms in some negotiations, it may also create long-term resentment among business partners and employees. This can especially become a problem when repeated interactions between the same parties across multiple deals occur over time or when similar negotiations with multiple parties are involved. A negotiating party can develop a reputation for pursuing a strategy of brinkmanship. It may even go so far as to alienate an opposing party and cause a failure in negotiations in which no party does business and a business relationship cannot be salvaged for many years to come.
Economics of Brinkmanship
Under certain economic conditions, brinkmanship will be more likely to succeed as a negotiating strategy. Market structure can play a key role in the success or failure of brinkmanship. When a party has a high degree of market power and the counterparty does not, brinkmanship is more likely to be useful. In situations where either party has a larger number of options available, that party will have an advantage if brinkmanship is employed. This is related to the competitive advantage produced by market concentration with respect to suppliers or customers described in Michael Porter's 5 Forces model.
Also, pursuing a strategy of brinkmanship can exploit an economic phenomenon known as "hold-up," developed by economist Oliver Williamson. Hold-up can occur whenever a party has made an investment in assets whose value is dependent on a specific relationship. An existing relationship with a counterparty that includes their investment in relationship-specific assets gives an advantage to a brinksmanship strategy because the counterparty risks losing the value of the relationship.
Note that these conditions also apply in reverse. A party that does not have market power, whose counterparty does have market power, or who is heavily invested in relationship-specific assets will be both less successful in pursuing a brinkmanship strategy and will be more vulnerable to brinkmanship themselves.
Even if brinkmanship is an aggressive practice, it may yield results for the aggressor. The key is to reduce the chances of a business relationship being irreparably harmed by using it. When negotiating with a vendor or supplier using brinkmanship, an aggressor should make sure they have a backup plan in case the vendor or supplier decides to disengage. Brinkmanship should also be employed at the beginning of a negotiation; if used toward the end of negotiation it will display a lack of good faith and invariably anger the other party. Brinkmanship should only be used when a relationship has been developed; using it too early will compel any prospective business partner or vendor to walk away because they have yet to invest any time or effort. Negotiators should also be realistic; asking for a massive discount from a supplier may be economically unviable for them and could end negotiations entirely.