"Expanding the pie" is more like changing the game. You have one thing you're negotiating on, and it's a zero-sum situation. One winner and one loser. But what if you bring other things into the negotiation, to turn that into a win-win situation? Then it's easier to find agreement.
The difference is "nibbles" is getting more out of the other party after an initial agreement has been made.
"Expanding the pie" is widening the scope of the negotiations in order to reach an agreement in the first place; within the parameters of the initial offering an agreement was never going to be made.
The actual example in the podcast was over pumpkins. There was only one person selling pumpkins in the village the negotiator was in during her time in the Peace Corps. She wanted to buy all four of them but the farmer would only sell her two. She even tried offering double but the farmer wouldn't budge.
The customer took the position of buying all four pumpkins because she needed them in order to make enough pumpkin pies.
The farmer took the position of keeping two pumpkins because she needed the seeds to plant for next year's crop.
Once they got out of positional bargaining and discovered the root of the problem, the solution became clear: The customer gets all 4 pumpkins at the original price, but first the farmer opens them all and takes the seeds, which the customer would have thrown out anyway. Thus, both got more than they would have if they'd stuck to their original positions.
1. calculating the total combined value all involved parties receive from making a deal 2. trying to increase this value above and beyond their BATNAs 3. then carving up and sharing this excess
So it's about focusing on specialized synergies and value creation. For a more in-depth read I'd recommend Co-Opetition by Brandenburger and Nalebuff (whose class on Negotiations I just completed): http://www.amazon.com/Co-Opetition-Revolution-Combines-Compe...