We tend to view job negotiations as battles over a fixed pie of resources: A higher salary for the employee means lower profits for the employer. More vacation time equals lowered productivity, and so on.
But employment negotiations can lead to win-win agreements. If an entrepreneur can’t afford office space, she will benefit from hiring employees who prefer to work at home. In that case, the parties have compatible preferences. Even when their preferences aren’t compatible, the two sides can make tradeoffs across issues to reach satisfying agreements: an employee who wants more vacation time might volunteer for a responsibility that others have shunned, for example.