Tag Archives: Cynthia S. Wang

“Precise” Offers Provide Negotiation Advantage

Malia F Mason

Malia F Mason

Opening negotiation offers typically “anchor” the discussion and shape settlement values.
Many people make opening offers in “round” numbers like $10 instead of “precise” numbers like $9.
However, “round number offers” were less powerful than “precise” offers in negotiations, found Columbia’s Malia Mason, Alice J. Lee, Elizabeth A. Wiley, and Daniel Ames.
This finding suggests that negotiators can improve their outcomes by specifying offers more precisely, such as $103.

Y Charles Zhang

Y Charles Zhang

Precise first offers more potently anchored the negotiation range than round number proposals, perhaps because those who proposed precise offers were perceived as more confident, credible, and “well-informed” regarding actual value.

Norbert Schwartz

Norbert Schwartz

This finding complements observations by University of Michigan’s Y. Charles Zhang and Norbert Schwarz of University of Southern California that consumers have less confidence in precise estimates when they doubt the communicator and when they engage in less “cooperative conversational conduct norms” during negotiations.

H Paul Grice

H Paul Grice

These norms, defined by Berkeley’s H. Paul Grice in Grice’s maxims, which advocate communicating:

  • Briefly,
  • Clearly,
  • Relevantly,
  • Truthfully,
  • Offering only as much and content as required.

Despite the apparent advantages of more precise offers, these could signal “inflexibility” to some co-negotiators.
As a result, people who received precise offers generally made more conciliatory counter-offers, leading to smaller adjustments and more favorable final settlements.
Precise offers also led to better final deals even when the negotiator opened with a less ambitious, but precise offer.

Martin Schweinsberg

Martin Schweinsberg

Another benefit of precise offers is that they are less likely to offend a co-negotiator by signaling aggression or greed, according to INSEAD’s Martin Schweinsberg collaborating with Gillian Ku and Madan M. Pillutla of London Business School’s and Cynthia S. Wang of Oklahoma State University.
Ambitious first offers may lead a negotiation partner to walk away from the discussion, resulting in an impasse or stalled progress toward a final settlement.

Gillian Ku

Gillian Ku

In addition, negotiators who see themselves in a lower-power position are more likely to walk away, even though both low-power and high-power negotiators were equally offended by extreme offers.
Though an extreme offer may result in high rewards, it can be a more risky strategy than offering a more moderate precise offer.

Manoj Thomas

Manoj Thomas

Another advantage of more precise offers is that buyers may not recognize their actual magnitude:  Buyers underestimated the size of precise prices, particularly under uncertain conditions in studies by Cornell’s Manoj Thomas and Vrinda Kadiyali with Daniel H. Simon of Indiana University.

In fact, U.S. homeowner participants in their lab said they would pay a higher price quoted in precise numbers than when stated in round number in the team’s analysis of actual residential real estate transactions in two U.S. markets.
In fact, buyers actually paid more when list prices were precise in experiments by Thomas and team.

Vrinda Kadiyali

Vrinda Kadiyali

Precise offers provide some of the benefits of favorably anchoring negotiation discussions while reducing risks of extreme offers.

-*How effective have you found “precise” opening offers in achieving your negotiation goals?

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Diverse Teams Analyze Problems More Effectively

When people anticipate working with people similar to themselves, they process information less effectively than when they anticipate collaborating with diverse co-workers.

Denise Lewin Loyd

Denise Lewin Loyd

Volunteers completed a survey about their political attitudes, read a murder mystery, determined the perpetrator, and rated their confidence in their conclusion in a study designed by MIT’s Denise Lewin Loyd, Cynthia S. Wang of Oklahoma State University, Columbia’s Katherine Phillips  and Robert Lount Jr. of Ohio State University.

Participants then wrote a statement about their conclusions before meeting another volunteer who had a different conclusion about the perpetrator to solve the case.

Cynthia Wang

Cynthia Wang

They learned the other person’s political affiliation and opinion about the murder and wrote their statements but were told the experiment was over, without meeting the other person.

Loyd’s team analyzed these preparation statements to determine “elaboration,” a measure of analysis complexity and depth, when people anticipated working with others who have different attitudes.

Katherine Phillips

Katherine Phillips

People who said they were members of any political party wrote less-detailed statements when they anticipated meeting with someone affiliated with the same political party.
In contrast, participants wrote more detailed statements when they anticipated meeting someone of a different political orientation.

Volunteers prepared less carefully when they anticipated working with someone who shared their views.
In contrast, when they expected to work with someone holding different views, they applied greater critical thinking to their problem analyses.

Robert B Lount Jr

Robert B Lount Jr

Some volunteers were instructed before preparing their written case analysis that developing a positive interpersonal relationship with the other person would increase solution accuracy.

Other participants learned that “concentrating on the task rather than the interpersonal relationship was most important way to have a productive meeting.”

People primed to focus on their interpersonal relations wrote less detailed preparation statements, suggesting that analytic rigor was sacrificed for interpersonal harmony.
In addition, when people were primed to focus on the task, they produced more thoroughly considered solutions.

When volunteers actually met to solve the case after writing their statements,
partners with the most accurate solutions came to the meeting with most detailed case analyses.

People in homogeneous groups may prepare less completely if they focus on cultivating interpersonal harmony and avoiding conflict.
In contrast, diverse groups may not attempt to form close social relationships, so are more able to focus on task analysis and solutions.
Diverse teams, then, provide multiple perspectives and greater focus on shared work tasks.

Ron Elsdon

Ron Elsdon

However, other researchers advocate workplace affiliation as a way to engage and retain employees.
Ron Elsdon, formerly of Cambridge University and Air Liquide America, suggested that workplace affiliation leads to organizational value creation, and Gallup’s Marcus Buckingham and Curt Coffman argued that “having a best friend at work” is both important for employee engagement and “one of the most controversial of the 12 traits of highly productive workgroups.”

Marcus Buckingham

Marcus Buckingham

Social relationships among similar people at work may feel good, but may not lead to the most effective or innovative problem analysis.

-*To what extent have you observed homogeneous work groups focusing on maintaining harmony at the expense of rigorous task analysis?

Curt Coffman

Curt Coffman

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Range Offers vs Point Offers in Negotiation for Advantageous Settlements

Daniel Ames

Daniel Ames

Many people hesitate to present a negotiation offer as a range due to concerns that only the lower value in the range would be heard due to selective attention by the co-negotiator.
In addition, many negotiators are concerned that the lower end of a range offer signals the “reservation price” or “bottom line.”

Malia F Mason

Malia F Mason

In fact, range offers may lead to stronger outcomes, according to Columbia University’s Daniel R. Ames and Malia F. Mason, who compared range offers with point offers in laboratory studies of negotiations.

First offers can be powerful anchors, despite their risk of bias and marginal accuracy, reported University of Chicago’s Nicholas Epley and Thomas Gilovich of Cornell.

Nicholas Epley

Nicholas Epley

Even more influential aredual anchors,” which signal both a negotiator’s knowledge of value as well as politeness.
Ames and Mason suggested that
negotiator credibility and knowledge of value increases anchor potency coupled with interpersonal relationship “capital” determine settlement outcomes.

Thomas Gilovich

Thomas Gilovich

These findings suggest that range and point opening offers can have varying impacts, depending on perceived preparation, credibility, politeness, and reasonableness of the proposer.

Ames and Mason tested three types of negotiation proposal ranges:

  • Bolstering range includes the target point value as the bottom of the range and an aspirational value as the top of the range, usually yields generous counteroffers and higher settlement prices.
  • Backdown range features the target point value as the upper end of the range and a concession value as the lower offer.
    This approach often leads to accepting the lower value and is generally not recommended.
  • Bracketing range spans the target point offer and tends to have neutral settlement outcomes for the offer-maker.
    Compared with point offer-makers, bracketing range offers provided some relational benefits because they were seen as less aggressive and stubborn.
Martin Schweinsberg

Martin Schweinsberg

Extreme anchors can be seen as aggressive and offensive, and may lead to negotiation breakdown, according to INSEAD’s Martin Schweinsberg with Gillian Ku of London Business School, collaborating with Cynthia S. Wang of University of Michigan, and National University of Singapore’s Madan M. Pillutla.
Somewhat surprisingly, the found that negotiators with little power were more likely to walk away from extreme anchors, though high-power negotiators were equally offended.

Gilliam Ku

Gilliam Ku

Previously, Mason and team showed the benefit of precise single number offers, and the current research shows the value of less precise range offers.

Mason and team argue that point offers and range offers are independent and interactive informational processes with influence on settlement values: “…bolstering-range offers shape the perceived location of the offer-maker’s reservation price, (and) precise first offers shape the perceived credibility of the offer-maker’s price proposal.

  • When do you prefer to present a precise, non-rounded negotiation offers instead of a negotiation range?

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