Tag Archives: negotiation

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 of values, assuming that co-negotiators will anchor on the lower value in the range as a “reservation price.” 

This is based on the power of first offers as negotiation anchors, demonstrated in research by University of Chicago’s Nicholas Epley and Thomas Gilovich of Cornell.

Malia F Mason

Malia F Mason

Contrary to this expectation, range offers actually led to stronger outcomes in controlled studies by Columbia University’s Daniel R. Ames and Malia F. Mason. These researchers suggested that range offers provide “dual anchors” that signal a negotiator’s knowledge of value as well as politeness.

Nicholas Epley

Nicholas Eple

In addition, negotiator credibility, interpersonal style, and value awareness increase an anchor potency’s to influence settlement outcomes.

Thomas Gilovich

Thomas Gilovich

Range and point opening offers have varying impacts, depending on the proposer’s perceived preparation, credibility, politeness, and reasonableness.

Ames and Mason tested three types of negotiation proposal ranges:

  • Bolstering range, which includes the target point value as the bottom of the range and an aspirational value as the top of the range.
    This strategy usually yields generous counteroffers and higher settlement prices.
    This approach is recommended based on this research.
  • Backdown range, which 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, which spans the target point offer and tends to have neutral settlement outcomes for the offer-maker.
    Compared with point offers, bracketing range offers provided some relational benefits because they were seen as less aggressive.
Martin Schweinsberg

Martin Schweinsberg

Extreme anchors can be seen as 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.
In fact, even negotiators with little power in their studies were more likely to walk away from extreme anchors.
Likewise, high-power negotiators said they were offended by extreme anchors.

Gilliam Ku

Gilliam Ku

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

Mason and team argued 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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Nothing to Lose: Effective Negotiating Even When “Powerless”

Michael Schaerer

Most negotiators prefer to have a “fall back position.”
However, having no alternatives and less power than co-negotiators can improve outcomes, found INSEAD’s Michael Schaerer and Roderick Swaab with Adam Galinsky of Columbia.

Alternatives enable negotiators to gain concessions from co-negotiators because they have a BATNA – Best Alternative To a Negotiated Agreement, defined by Harvard’s Roger Fisher and William Ury.

Roger Fisher

Roger Fisher

When an alternative is weak, it can undermine negotiating outcomes more than having no alternative because it establishes an “anchor point” based on competing options.

Anchoring is a frequent cognitive bias characterized by overvaluing one piece of information, according to Hebrew University’s late Amos Tversky and Daniel Kahneman of Princeton.

William Ury

William Ury

Negotiators usually anchor on the value of alternatives when making a first offer, and people with weak alternatives generally make lower first offers than those with no alternative.
“Lowball” first offers based on few or poor alternatives usually undermine a negotiator’s final outcome.

Professional athletes and their agents provide examples of negotiating better deals when they have no “back up” offers and “nothing to lose,” so they can set ambitious anchor points.

Amos Tversky

Amos Tversky

In a separate study, Schaerer and team asked a hundred people whether they would prefer to negotiate a job offer with a weak alternative or without any alternative.
More than 90 percent of participants preferred an unattractive alternative offer, confirming the popular assumption that any alternative is  better than no alternative.

Another of Schaerer’s lab studies asked volunteers to imagine selling a used music CD by The Rolling Stones.
Participants were randomly assigned to three groups which received different information about their negotiation situations:

  • No offers (no alternative),
  • One offer at USD $2 (weak alternative),
  • A bid at USD $8 (strong alternative).
Roderick Swaab

Roderick Swaab

Volunteers in each group proposed a first offer, and rated the degree of power they felt.
Not surprisingly, people with the strong alternative felt the most powerful and those with no alternative felt the least powerful.

However, people with a weak alternative felt more powerful than those with no alternative, but they made lower first offers, signaling less confidence than participants with no alternative.
Having any alternative can help people feel powerful but can undermine negotiation performance.

Schaerer’s team explored this paradox by pairing a  “seller,” who offered a coffee mug during a face-to-face meeting, and a potential “buyer.”

Adam Galinsky

Adam Galinsky

Before the meeting, the seller received a phone call from “another buyer,” who was actually a confederate of the researchers.
For half of the “sellers,” the potential buyer either made a low offer or declined to bid.

“Sellers” without an alternative offer said they felt less powerful, but made higher first offers and received significantly higher sales prices than negotiators with an unattractive alternative.

In another situation, half of the “sellers” concentrated on available alternatives (none, weak, or strong) and the remaining negotiators focused on the target price.

Volunteers with unappealing alternatives negotiated worse deals than those with no options when they focused on alternatives.
“Sellers” avoided this pitfall by concentrating on the target price.
These findings support the benefit of focusing on the goal when alternatives are weak, and the power of first-offer anchors.

Negotiators with non-existent or unappealing alternatives can beware of making cautious first offers when they feel powerless.
Instead, negotiators can set audacious goals and make an ambitious opening offer because they have the benefit of “nothing to lose.”

  • How do you overcome lowball anchoring when you have few negotiation alternatives?

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“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 effective than “precise” offers in negotiations, found Columbia’s Malia Mason, Alice J. Lee, Elizabeth A. Wiley, and Daniel Ames.

Y Charles Zhang

Y Charles Zhang

Negotiators can improve their outcomes by specifying offers in precise values.
Precise first offers more potently anchored the negotiation range than round number proposals, and people who proposed precise offers were perceived as more confident, credible, and “well-informed” regarding actual value.

Norbert Schwartz

Norbert Schwartz

Similarly, consumers have less confidence in precise estimates when they doubt the communicator, found University of Michigan’s Y. Charles Zhang and Norbert Schwarz of University of Southern California.

A drawback of precise offers is that some co-negotiators perceive them as “inflexible.
Despite this risk, 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 precise offer.

Martin Schweinsberg

Martin Schweinsberg

Another benefit of precise offers is that they are less likely to be seen as aggressive or greedy by a co-negotiator, 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 an impasse or stalled progress toward settlement if a negotiation partner takes offense or walks away from talks.

Gillian Ku

Gillian Ku

This risk of stalled negotiation increases if negotiators see themselves in a lower-power position and receive an extreme offer.
These negotiators can be more willing to end negotiations,

Manoj Thomas

Manoj Thomas

Precise offers may obscure their actual value, found Cornell’s Manoj Thomas and Vrinda Kadiyali with Daniel H. Simon of Indiana University.
Buyers underestimated the size of precise prices, particularly under uncertain conditions:  U.S. homebuyers paid more when list prices were precise, and volunteers said they would follow this strategy in buying a home.

Vrinda Kadiyali

Vrinda Kadiyali

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

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

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Women May Undermine Salary Negotiations with Excessive Gratitude

Andreas Leibbrandt

Full, candid self-disclosure can hamper outcomes for poker players and negotiators.

This idea was confirmed in an experiment by Monash University’s Andreas Leibbrandt and John A. List of the University of Chicago, when women undermined their salary negotiations by revealing their gratitude for a salary that exceeded their expectations.

John List

John List

Participants were women applying for administrative assistant jobs with a posted wage of USD $17.60 per hour.

Researchers told some volunteers that the wages were “negotiable,” and these women negotiated their pay upward by a ratio of more than 3 to 1.
This result echoes previous findings that women frequently do not negotiate unless given explicit permission, and consequently, have lower salary offers than those who negotiate.

Leibbrandt and List tested this hypothesis by not mentioning negotiation to the remaining participants, and these women typically provided “too much information” by remarking that the posted wage “exceeds my expectations. I am willing to work for a minimum of $12.”

Edward E. Jones

Edward E. Jones

Though this approach likely leads to lower salary, it could be considered strategic ingratiation.
This negotiation approach that can take several forms, according to Duke University’s Edward E. Jones:

-Self-presentation (self-enhancement or “one-down” humility, providing favors or gifts),

-Flattery (“other-enhancement” either directly or ensuring word-or-mouth report of positive yet credible comments),

-Agreement (opinion-conformity, non-verbal matching-mimicry).

The ingratiator’s intent may have been to enhance the future working relationship, but could cause the negotiation partner to question the applicant’s judgment, qualifications, and confidence.
The longer term impact in workplace settings is to delay salary increases because the candidate appeared satisfied with the original offer.

Steven H. Appelbaum

Steven H. Appelbaum

However, “strategic ingratiation” may result in promotion or pay increase, according to Concordia University’s Steven H. Appelbaum and Brent Hughes.

They found that effective use of “strategic ingratiation” was influenced  by situational and individual factors including:

  • Machiavellianism,
  • Locus of control,
  • Work task uniqueness.
Jeffrey Flory

Jeffrey Flory

In another of Leibbrandt and List’s randomized field studies, collaborating with Concordia colleague Jeffrey Flory, they found that among nearly 2,500 job-seekers, men did not wait for permission to negotiate when no statement was made about salary discussions.

In fact, male participants said they prefer ambiguous salary negotiation norms.
Despite women’s general hesitance to negotiate without an invitation, women advocated for more favorable salaries at about the same rate as men when invited.

The team extended these findings by analyzing nearly 7,000 job-seekers with varying compensation plans.
In “competitive work settings,” salary negotiation was typically expected, and men stated a preference for these work environments.

Leibbrandt, List, and Flory concluded that women accept “competitive” workplaces provided “the job task is female-oriented” and the local labor market leaves few alternatives.

Women looking for better salary outcomes benefit from proposing their “aspirational salaries” rather than waiting for permission to negotiate.
In addition, women negotiators can achieve better outcomes when they offer moderate expressions of gratitude and avoid revealing their “reserve” salary figure.

-*In what work situations have you benefitted from applying ‘strategic ingratiation’?

-*To what extent have expressions of gratitude in negotiation undermined bargaining outcomes?

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Negotiation Drama: Strategic Umbrage, Line-Crossing Illusion, and Assertiveness Biases

Daniel R Ames

Daniel R Ames

Optimally matching assertiveness style to specific situations can determine success in negotiations, according to Columbia University’s Daniel Ames and Abbie Wazlawek.

Abbie Wazlawek

Abbie Wazlawek

Earlier, Ames and Stanford’s Frank Flynn reported that moderate levels of assertiveness are associated with career advancement, and with effective negotiation and influence in conflict situations.
They also found that observers provided consistent ratings of managerial under-assertiveness and over-assertiveness.

Francis Flynn

Francis Flynn

However, most people do not accurately assess others’ evaluation of their assertiveness in specific situations.
Over-assertive individuals tend to have less-accurate self-perception than less assertive people, and both groups experience “self-awareness blindness.
These inaccurate self-perceptions may develop from polite yet inaccurate feedback from others, which provides faulty information.

More than 80% of participants reported that they had expressed greater objections than they actually felt to influence the negotiation partner, and said they observed exaggerated objections by their negotiation partners.

Daniel Ames Assertiveness

Self-awareness resulted in most favorable negotiation outcomes: More than 80% of negotiators rated by others and by themselves as “appropriately assertive in the situation” negotiated greatest value to both parties.

Ames Assertiveness U CurveStrategic umbrage also appeared effective:  People who received these intentional emotional displays from their negotiation partners were more likely to rate themselves as over-assertive in their negotiation position.
However, negotiators who applied strategic umbrage rated these self-critical negotiation partners as appropriately assertiveness.
Ames and Watzlawek called this misperception of others’ perceptions the line-crossing illusion.

This mismatch between negotiation partners’ ratings of appropriate assertiveness was linked with poorer negotiation outcomes:  Nearly 60% of negotiators who were rated as appropriately assertive but felt over-assertive (line-crossing illusion) negotiated the inferior deals for themselves and their counterparts.
This suggests that disingenuous emotional displays of strategic umbrage lead negotiation partners to seek the first acceptable deal, rather than pushing for an optimal deal.

Jeffrey Kern

Jeffrey Kern

To improve accuracy of meta-perception – other people’s perception of assertiveness style – Ames and Wazlawek suggested:

-Participate in 360 degree feedback,

-Increase skill in listening for content and meaning,

Consider whether negotiation proposals are reasonable in light of alternatives,

-Request feedback on reactions to “strategic umbrage” displays to better understand perceptions of “offer reasonableness,

-Evaluate costs and benefits of specific assertiveness styles:

Gary Yukl

Over-assertiveness may provide the benefit of “claiming value” in a negotiation but may lead to ruptured interpersonal relationships and ill-will, according to Jeffrey M. Kern of Texas A&M, SUNY’s Cecilia Falbe and Gary Yukl.

  • Consider cultural norms for assertiveness regulation in “low context” cultures like Israel, where dramatic displays are frequent and expected in negotiations.
    In contrast, “high context” cultures like Japan, require more nuanced assertiveness, with fewer direct disagreements and “strategic umbrage” displays, according to Edward T. Hall, then of the U.S. Department of State.
Edward T Hall

Edward T Hall

Likewise, under-assertiveness may minimize interpersonal conflict, but may lead to poorer negotiation outcomes and undermined credibility in future interactions, according to Ames’ related research.

To augment a less assertiveness style:

  • Set slightly higher goals,
  • Reconsider assumptions that greater assertion leads to conflict,
  • Consider that proactivity may lead to increased respect and improved outcomes,
  • Assess the outcome of collaborating with more assertive others.

To modulate a more assertiveness style:

  • Make slight concessions to increase rapport and trust with others,
  • Observe and evaluate the impact of collaborating with less assertive others.

The line-crossing illusion is an example of a self-perception bias in which personal ratings of behavior may not match other people’s perceptions, and others’ behaviors can attenuate individual confidence and assertiveness.

*How do you reduce the risk of developing the line-crossing illusion in response to other people’s displays of “strategic umbrage”?

*How do you match your degree of assertiveness to negotiation situations?

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Mindfulness Meditation Improves Decisions, Reduces Sunk-Cost Bias

Sigal Barsade

Sigal Barsade

Andrew Hafenbrack

Andrew Hafenbrack

Sunk-cost bias” is the prevalent tendency to continue unsuccessful actions after time and money have been invested.
Frequent examples include:

  • Holding poorly-performing stock market investments,
  • Staying in abusive interpersonal relationships,
  • Continuing failing military engagements.
Zoe Kinias

Zoe Kinias

In these cases, people tend to focus on past behaviors rather than current circumstances, leading to emotion-driven decision biases.

Brief meditation sessions can help decision makers consider factors beyond past “sunk costs,” reported Wharton’s Sigal Barsade, with Andrew C. Hafenbrack and Zoe Kinias of INSEAD.

Meditation practices can:

  • Enable increased focus on the present moment,
  • Shift attention away from past and future actions,
  • Reduce negative emotions.
Kirk Brown

Kirk Brown

Barsade, Hafenbrack, and Kinias asked volunteers to complete Mindful Attention Awareness Scale, a widely used assessment developed by Virginia Commonwealth University’s Kirk Brown and Richard Ryan of University of Rochester.

Richard Ryan

Richard Ryan

They also measured participants’ ability to resist “sunk cost” bias using Adult Decision-Making Competence Inventory, developed by Leeds University’s Wändi Bruine de Bruin with Baruch Fischhoff of Carnegie Mellon and  RAND Corporation’s Andrew M. Parker.

Wändi Bruine de Bruin

Wändi Bruine de Bruin

In a decision task, participants could choose to take an action or to do nothing, as a measure of sunk-cost bias.
Taking action indicated resistance to the sunk-cost bias, whereas those who took no action were seen as influenced by the sunk-cost bias.

Baruch Fischhoff

Baruch Fischhoff

Volunteers who listened to a 15-minute focused-breathing guided meditation were more likely to choose action, resisting sunk-cost bias, than those who had not heard the meditation instruction.

Andrew M Parker

Andrew M Parker

Barsade’s team noted that, “People who mediated focused less on the past and future, which led to them experiencing less negative emotion. That helped them reduce the sunk-cost bias.

Jochen Reb

Jochen Reb

Mindful attention also enables negotiators to craft better deals by “claiming a larger share of the bargaining zone” in distributive (“fixed pie”) negotiations, found Singapore Management University’s Jochen Reb, Jayanth Narayanan of National University of Singapore, and University of California, Hastings College of the Law’s Darshan Brach.
These effective negotiators also expressed greater satisfaction with the bargaining process and outcome. 

Jayanth Narayanan

Jayanth Narayanan

Mindful attention also leads to a lower negativity bias, the tendency to weigh pessimistic information more heavily than positive, reported Virginia Commonwealth University’s Laura G. Kiken and Natalie J. Shook of West Virginia University.

The team assessed negativity bias with BeanFest, a computer game developed by Shook, with Ohio State’s Russell Fazio and J. Richard Eiser of University of Sheffield.

Natalie Shook

Natalie Shook

Participants associated novel stimuli with positive or negative outcomes during attitude formation exercises.

Russell Fazio

Russell Fazio

Volunteers who listened to a mindfulness induction correctly classified positive and negative stimuli more equally, expressed greater optimism, and demonstrated less negativity bias in attitude formation than those in the control condition.

J Richard Eiser

J Richard Eiser

Mindful attention improves decision-making and enhances negotiation outcomes by reducing biases linked to negative emotions.
As a result, taking a brief mental break (“time-out”) during decision-making can improve choices and reduce the likelihood that “let the wrong emotions cloud the decision-making process.”

-*How do you reduce bias in making decisions and crafting negotiation proposals?

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Anxiety Undermines Negotiation Performance

Maurice Schweitzer

Maurice Schweitzer

Anxious negotiators make lower first offers, exit earlier, and earn lower profits  due to their “low self-efficacy” beliefs, according to Harvard’s Alison Wood Brooks and Maurice E. Schweitzer of University of Pennsylvania,

Alison Wood Brooks

Alison Wood Brooks

Brooks and Schweitzer induced anxious feelings or neutral reactions during continuous “shrinking-pie” negotiation tasks.
Compared with negotiators experiencing neutral feelings, negotiators who feel anxious typically expect to achieve lower profits, present more cautious offers, and respond more cautiously to propositions presented by negotiation counterparts.

Negotiators who achieved more effective bargaining outcomes managed emotions with cognitive strategies including:

Julie Norem

Julie Norem

  • Strategic optimism, indicated by expecting positive outcomes without anxiety or detailed reflection, according to University of Miami’s Stacie Spencer and Julie Norem of Wellesley,
  • Reattribution, by considering alternate interpretations of events to increase optimism and self-efficacy beliefs.

Cognitive strategies with both performance benefits and liabilities include:

  • Andrew Elliot

    Andrew Elliot

    Self-handicapping, avoiding anxiety-provoking situations, and creating self-defeating obstacles to explain poor outcomes and preserve self-esteem, according to University of Rochester’s Andrew Elliott and Marcy Church of St. Mary’s University,

  • Defensive pessimism, marked by high motivation toward achievement coupled with negative expectations for future challenges, leading to increased effort and preparation, according to Wellesley College’s Julie Norem and Edward Chang of University of Michigan.
Edward Chang

Edward Chang

Norem and Cantor concluded that defensive pessimists performed worse when “encouraged by telling them that that based on their academic performance, they should expect to perform well on anagram and puzzle tasks.

Among university students, defensive pessimism was related to lower self-esteem, self-criticism, pessimism, and discounting previous successful performances when they began university studies, according to Norem and Brown’s Jasmina Burdzovic Andreas.

Jasmina Burdzovic Andreas

Jasmina Burdzovic Andreas

However, their longitudinal study demonstrated that self-esteem increased to almost the same levels as optimists during their four years of university study.
Pessimists’ precautionary countermeasures may have resulted in strong performance, which built credible self-esteem.

Defensive pessimism’s positive performance outcomes suggest that this cognitive strategy is an effective, if uncomfortable, approach to managing anxiety and performance motivation.

-*How do you manage anxiety in high-stakes negotiations?

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