Brinkmanship

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.

Key Takeaways

  • 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.
  • The term first appeared in foreign policy as a form of aggressive diplomacy that could bring parties to the "brink of war."
  • In business negotiations, brinkmanship has become a point of artful skill.
  • 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.

Understanding 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 amicable 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 Risks

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.

The term "brinkmanship" first appeared in a 1956 article in Life Magazine in an interview with former U.S. secretary of state John Foster Dulles, in which he claimed that, in diplomacy, “The ability to get to the verge without getting into the war is the necessary art...if you are scared to go to the brink, you are lost.”

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. 

Brinkmanship Tips

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 negotiations it can 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.

Responding to Brinkmanship

Brinkmanship can be disruptive and cause negotiations to unravel. If you are on the receiving end of such tactics, it can leave you feeling bullied, vulnerable, or anxious.

One way to avoid this situation is to find alternative business partners, vendors, or customers that do not have the same demands, This avoids having to make unnecessary or uncomfortable concessions. If, however, there are no such alternatives one strategy is to accept an aggressive demand but also seek relief elsewhere. For instance, if a key supplier offers a take-it-or-leave-it price on a needed component, you may ask for something else of value like an extended warranty, free customer support, or future discounts.

Example of Brinkmanship in Business

There are many examples of brinkmanship in business negotiations. A common example is a take-it-or-leave-it offer, which may also come with a relatively short time frame for consideration (e.g., $10,000 is my final offer, and it's only good for five minutes!).

This type of "hard sale" is a tactic often found in big-ticket items such as when shopping for a car or house hunting. If a vehicle or property is especially in high demand these types of offers can preclude the back-and-forth negotiations and haggling that may otherwise occur.

Say that a potential homebuyer sees a property and puts in a bid for $500,000 when the asking price is $550,000. The buyer does not usually know the seller's situation or how eager they are to sell. The buyer may thus engage in brinksmanship by saying the price is best and final, and good for only 24 hours.

What Is Brinkmanship Negotiation?

Brinkmanship means to "bring to the brink" a deal. The brink being the edge of a cliff, it refers to making an aggressive offer that has the potential to derail negotiations and push the deal over the point of no return. The term originated in the context of war and diplomacy in the mid-1900s, but quickly made its way to business.

What Is Brinkmanship in Foreign Policy?

In foreign policy, brinkmanship is a form of aggressive diplomacy in which one or both parties force the interaction between them to the threshold of confrontation in order to gain an advantageous negotiation position over the other.

How Do You Deal With Brinkmanship?

Experts say that the best way to deal with brinkmanship is to reduce any vulnerabilities before entering into negotiations to begin with. However, sometimes this is impossible. In such situations, it is best to seek alternative parties to negotiate with or seek concessions elsewhere.

Article Sources
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  1. Britannica. "Brinkmanship."

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