Sources from: http://www.wisegeek.com/what-is-a-win-win-situation.htm
A win-win situation, also called a win-win game or non-zero-sum game in games theory, is a situation by which cooperation, compromise, or group participation leads to all participants benefiting. The term can be applied to many aspects of daily living, and it is contrasted to the zero-sum game or win-lose situation, where the dominant factor is that at least one person wins while another loses. These are also called zero-sum games and examples include most two-person board games. For instance a chess game is zero-sum. One winner, +1, is added to one loser, -1, resulting in a total of zero.
The win-win situation is different, since its total according to game theory could be two or more. In a two-person scenario, where both people could cooperate and thus benefit, this could be mathematically expressed and +1 plus +1 = 2. Instead of a situation creating a winner and a loser, both people win a roughly equivalent amount.
You can apply the term win-win situation to any small negotiations in life. A typical comparison might be compromise between a husband and wife on an issue of contention. Perhaps the couple is arguing about division of chores and childcare. The husband contends he works outside the home and should not have to take care of the house or children.
The wife contends that the amount of work inside the home and regarding childcare is just as weighty during the day. If the wife simply allows the situation to continue status quo, she is statistically the loser or -1. Some recent studies suggest that women who care for children at home work essentially an 18-20 hour day, depending upon the number and age of children. She really is the loser by this proposition, particularly when the husband refuses to help.
For the couple to create a win-win scenario, compromise and understanding of workload is needed. If studies indicate that a stay at home mom is actually working the equivalent of two and half full time jobs, then this figure needs to be fully grasped by the husband. He’s also probably got a tired and possibly cranky wife on his hands while the situation remains the same, and he may earn her resentment. But technically he is winning something, the benefit of free time, while the wife is not.
If the couple decides to compromise, and the husband helps with some chores or childcare to even the workload, the couple have created a win-win situation. Some might ask how the husband wins in this scenario. He benefits from a wife less tired, perhaps more devoted to the relationship, and certainly less resentful. The wife wins a little free time and the share of work becomes equitable.
Any situation where parties agree to act in both their own interest and in the interest of the group can be a win-win situation. In economy, this may also be referred to as the Nash Equilibrium. Any participant in a situation or game takes into account the way that his/her own decisions and choices affect all other participants. When this occurs, and when all participants develop a strategy which benefits the “whole,” a win-win situation develops. It should be stated that not everyone in every possible permutation of this scenario wins exactly the same thing or the equivalent amount.
The basis for any win-win situation is that compromise and cooperation must be more or at least as important as ego and competition. Everyone likes to “win” but the question raised to create the win-win situation is: How can a situation be established where nobody loses? It’s hard to create win-win situations when people are selfish and egotistical, and especially if they don’t care whether their personal gains result in someone else’s losses.