Abandonment
While the goal of negotiation is to reach a mutually beneficial agreement, sometimes this is not possible. In such cases, it may be better to abandon the deal, than to agree to something that is not in your best interest.
There are three main scenarios where you should abandon a deal: when the terms are unacceptable, when accepting would set a bad precedent, or when accepting the deal would hurt your professional reputation.
The first scenario is when the best deal you can get is unacceptable. Care has to be taken not to reach this conclusion too quickly, as it is common that people will start a negotiation by "low-balling," which is to say, proposing terms that are far outside of what you would accept. As this is such a common tactic at the start of the bargaining process, no offense should be taken, and there is no reason to abandon the deal - at least not in the beginning.
For example, let's say you were selling your car for a fair market price of $10,000, and someone approached you with an offer of $3000. This would be considered a "lowball," and isn't meant to be taken seriously, as it is only a starting point for the negotiation. Throughout the course of the negotiation, the price should get closer to $10,000 as offers and counteroffers are made, but if it stays at $3000, then it was not a lowball - this is apparently all this person is willing to pay. Assuming you did not want to take a $7000 loss, you should abandon the deal, as their terms are entirely unacceptable.
The second scenario is when accepting a deal would set a bad precedent, such that by accepting a bad deal today, people would be encouraged to try to make more bad deals with you in the future. The fear of setting a bad precedent is why governments do not negotiate with terrorists, as setting the precedent that you can get what you want by taking hostages would do nothing but encourage more hostage-taking.
For example, if a customer wanted a 40% discount, and you agreed, then you have set the precedent that your company offers 40% discounts. As word gets around to other customers, they too would want a 40% discount, as they would feel that they would be overpaying if they paid the full price.
The third scenario is when accepting the deal would hurt your professional reputation.
Professionals are generally considered to be savvy negotiators, regardless of their specific field of work. Whether you are a carpenter negotiating a kitchen remodel, a doctor negotiating with an insurance company, or a small business owner negotiating with a bank for a loan, there is an expectation that all professionals know how to negotiate.
Therefore, if a carpenter agreed to do a kitchen remodel for a fraction of the fair market price, or a doctor ended up having to charge their patient for a procedure they know is covered by insurance, or a small business owner accepts a loan with an extremely high interest rate, it would be difficult to think of our carpenter, doctor, and small business owner as professionals, as being taken advantage of in a negotiation is something most people associate with being an amateur.
As our skill at negotiation is a reflection of our experience as a professional, if we are ever about to agree to obviously terrible terms, we should consider how getting the reputation of being a bad negotiator might impact our career. For example, if a salesperson got the reputation of always agreeing to terms that heavily favored customers, and that each deal they made actually lost the company money, they would not be a salesperson for long.
Whatever the reason we have for abandoning a deal, there is one rule that should always be followed: never burn a bridge, which is to say, never end a negotiation in such a way that the possibility of future deals is totally eradicated.
For example, if a customer asked you for an 18-month free trial, unlimited 24/7 live support for the length of the trial, and a guarantee of an 80% discount on all future purchases, as tempting as it might be you should not say, "You must take us for some real fools, huh? Well my mama didn't raise no fool, and I'm not going to sit here and have you rake me over the coals just so you can go brag to your friends how you took me for everything I'm worth. We're done here. Feel free to never call us again." Instead, you should say, "That's an interesting offer. Let me take that back to my people and we'll see what we can do." After ending the meeting politely, you might wait a day or two and email them, "After careful consideration, we realize we are unable to satisfy your needs at this time, but we look forward to doing business with you in the future. Wishing you all the best, the sales team."
The reason to never burn a bridge is simply because there is no strategic benefit to doing so. Worst-case scenario, you get the reputation of being a polite but firm negotiator; best-case scenario, someone realizes that you have left the negotiation, still wants to make a deal, and makes you a better offer, which then gives you all of the leverage as they came to you.
It could be argued that the true benefit of abandoning a deal is to establish the boundaries of what you will or will not accept, so that the other side takes you seriously from that point forward. Provided you did not burn a bridge, the natural course of events is for the other side to realize they pushed too hard, that they were being unreasonable, and that they need to make amends in order to reach an agreement. In this way, abandoning a deal may not be the end, only the start of a new beginning.