The Negotiator Magazine

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From the answers to these last questions, I point out a paradox that affects most negotiators. Those persons who are the most satisfied at the conclusion of an interaction tend to achieve less beneficial results than those who are less satisfied. Those who did not hope to obtain much were able to come close to their preliminary goals and they are happy. Those who established more generous goals are disappointed by their inability to get everything they wanted. I then tell my students that they should feel comfortable at the end of bargaining encounters if they think they did all right even though they are disappointed that they didn't do better. On the other hand, when they are completely satisfied with their results, they should be nervous. What else might they have obtained had they only established higher initial objectives?

Persons who usually get everything they want when they negotiate should raise their aspiration levels. They must do this in increments to avoid future disasters. They should initially raise their goals by five or ten percent. If they continue to get most of what they want in the coming weeks, they should raise their goals by another five or ten percent. They should continue this practice until they begin to come up short. If they never feel disappointed at the end of their negotiations, they should recognize that they have probably failed to establish sufficiently elevated aspiration levels.

II. Impact of Anchoring

Many negotiation teachers instruct students to begin their interactions with reasonable positions that will induce their opponents to respond in kind. This win-win approach will enable the bargaining parties to achieve results that are fair to both sides. The difficulty with this advice is that is empirically false. The fact that one side has begun with a reasonable position does not force the other side to respond with a similarly realistic offer. In fact, manipulative opponents can use opportunistic behavior to seize the advantage. They can begin with a less generous offer and use strategic tactics to obtain better deals for themselves.

The initial positions articulated by people when they negotiate significantly influence the final terms they achieve. When someone begins with a reasonable opening offer, their opponent begins to think he or she will do better than they initially imagined. They are emboldened. They raise their goal and articulate a less generous position than they might have expressed to take advantage of the other side's naivety. On the other hand, if they initially receive a less generous opening offer, they begin to doubt their preliminary assessment. They think that they will not be able to do as well as they originally hoped. As a result, they lower their expectation level and begin to think they will have to give the other party a better deal for that side than they hoped.

Individuals who use a cooperative negotiation style should be careful not to announce reasonable opening offers unless they are absolutely certain they are interacting with persons who share their philosophy and will respond in kind. If they have any doubts, they should always formulate initial positions that give them more bargaining room. They must remember that less generous offers tend to undermine opponent confidence, while more generous offers tend to embolden those parties.

To demonstrate the impact of anchoring, I give my students a fact pattern describing a typical motor vehicle accident. They all receive the identical fact information and are told they represent the defendant. They are told of the initial demand they have just received from the plaintiff lawyer and asked how much they think they will have to pay to resolve the matter. I vary only one factor. Half of the students are told they have received a $60,000 demand, while the other half are told they have received a $30,000 demand. Those facing a $60,000 demand indicate that they will have to pay more than those facing a $30,000 demand. In many cases, those facing the $60,000 demand indicate that they will have to pay more than $30,000 to settle the case.

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October 2005