I'm going to share some interesting data with you right now. And the first one is that the cost of negotiating an average business to business contract is about $16,800. Think about that number for a second, it's actually a huge expense. The next piece of data I want to share with you is that the annual cost of negotiating contracts in larger corporation is 1.26 billion American dollars. Think about that cost a second. The third piece of data I want to share with you is that 8.2 billion business to business contracts are being signed every year around the world.

And at least 50% of those business to business contract require some kind of negotiation. And out of that, up to 42% of the potential values have been lost. We're talking a huge potential amount of money that is not really being utilized in negotiations. When we're talking about this amount is really Related, obviously, to economics, and when I was heading and being chairman of the Center for negotiation at Copenhagen business school, I had a group of postdocs, PhDs and professors doing a study where they looked into the thousand biggest companies in Scandinavia, and specifically in Denmark, and they looked at how much of these companies were actually abusing or losing the value. We also did this study in the US. I'm getting back to that in a second.

But what we learned in Denmark alone, which is a tiny country of about 6 million people, is that the loss potential among the thousand biggest Corporation in Denmark was about 81 billion American dollars every single year by not utilizing the potential of nickel economics. During the same study in the US looking at the thousand biggest corporations in the US, the number we came up with is the one you see next to me. I don't even know how much money that is. It just shows us that it's a substantial amount of loss but Henschel by not focusing on the concept of macroeconomics. Now, what is nature economics? Well, very briefly, let me share this example with you, we have a very simple negotiation, it could be just a buyer and a seller.

And let's say that these two parties in this negotiation that is on the screen right now is negotiating a total deal that has a value of just $10 million while we run an average by studying 35,000 negotiation is that the purchaser will an average leave this negotiation with about 19% of all the values. So in this case, that would obviously be 1.9 million. The interesting thing is Ladies and gentlemen, that he or she don't know how much the actually gaining of the total pie on the other side of the table is to sell a sitting and we know that in average, the seller will be leaving this negotiation with about 39% of all the values. So in this case, obviously that will be $3.9 million. And the same thing happens right here. They still don't know how They actually gained out of the total potential pie.

And the interesting part here is that up to 42% of the potential values are being left on the conference table when the two parties have reached an agreement. So that means in this case, up to $4.2 million are being unutilized, and are being lost by the two parties without ever realizing it, capitalizing it or gaining any of that value. This is why the concept of network economics is so important, because that amount of the up to 42% actually is a value that doesn't cost neither of the parties involved anything. It's actually true plus true that equals seven. So we're just generating additional value without giving something away. Now, where's that coming from?

Well, if we look at the real negotiation space that is obviously way bigger than most people think if we integrate Typical zero sum game, this is the model that we're working from, we have a buyer and the buyer is controlled either by he's or she's budget, or what we call the NBA, that's the next best alternative that could be an alternative supplier. And let's say in this case that the buyer has a maximum they can use on this negotiation for 150,000. That's the maximum they're willing to pay. Now the supply on the other side of the table don't know that but the supplier on the other side of the table has a threshold limit of 120. So that is the lowest price that the sales rep can go down to the buyer obviously, very often don't know that. So while we call the traditional negotiation space is the 30,000.

That is the difference between what the buyer can pay and the sales rep can reduce their price to that is not the real negotiation space though. The real negotiation space is obviously the 30,000 plus the potential of the 42%. Now we If we are able and capable of addressing negative economics and utilizing that potential, three things will happen. The first thing is that this space we got up here will suddenly become bigger. That means we have more room to negotiate. That also means that negotiation will become easier.

And on top of that, it also means that you could win but not at the expense of your counterpart, and your counterpart could win but not at the expense of you.