What is Negotiation Bias?

What is Negotiation Bias?

For better or for worse, human beings are not always rational.

Our values, beliefs, and backgrounds can have an enormous impact on the way we view the world and process information.

The difference between the way our brain perceives information and the way it actually is, is known as cognitive bias.

These biases can be particularly problematic in the context of negotiation, as it can prevent parties from reaching a rational, mutually beneficial outcome.

Understanding and recognising negotiation bias will help you to minimise its impact on your negotiation performance. This is because recognising bias in your decision-making will allow you to adjust for it, thereby making more rational decisions, and achieve more efficient outcomes. 

Read on to learn about the 3 most important types of bias for negotiators. 

Negotiation bias.jpg

 

Egocentric Biases

The first bias is negotiator overconfidence and egocentrism.

Essentially, this means that negotiators, and indeed human beings generally, tend to overestimate their own abilities, chances of success and control over outside forces. 

This bias is particularly problematic in that it plays an important role in how disputes develop in the first place and why parties to a legal dispute often want to litigate rather than settle. 

This bias has been proven to exist in study after study. In one example, University of Texas law students were given identical facts and arbitrarily assigned to represent either the plaintiff or the defendant in a fictional personal injury case. The plaintiff was seeking $100,000.

When asked to predict the judge's award on the facts, the students representing the plaintiff on average predicted it would be $14,527 higher than did the students representing the defendant.

Clearly, the two sides can't both be right. The only material difference was the side that they were on.

This overconfidence can present an important barrier to negotiation as it reduces the zone of possible agreement. If both parties are overconfident in succeeding, there is reduced incentive to settle. The parties are more likely to walk away from an objectively reasonable offer.

Recognising and accounting for this bias allows negotiators to make more accurate assessments of the strength of their hand relative to their counterparty. It will also increase the odds of a negotiated agreement that provides better value than the alternative. 

 

The Mythical Fixed Pie 

This term, coined by Bazerman and Neale, refers to the human tendency to overestimate the extent of conflict and underestimate the amount of common ground they share with others. 

In other words, negotiators incorrectly tend to assume that 'if it's good for them, it must be bad for us'. The value in the negotiation is viewed as a fixed pie. A bigger slice for them means a smaller slice for you. 

In reality, this is often not the case, but this can prevent negotiators from looking outside the box and considering creative solutions which result in 'win-win' outcomes.

Recognising this bias and questioning your assumptions can help a negotiator realise there is more common ground than first meets the eye.  This will open a negotiator's eyes to more efficient, optimal solutions that they would not otherwise consider. 

 

Perceptions of Fairness 

A final bias that can impact on a negotiation is the human sensitivity to the concept of fairness.

Studies have shown that even in monkeys, there is an innate sensitivity to the concept of fairness and a (sometimes irrational) revulsion to be treating unfairly. 

In many negotiations, however, fairness has less importance than the realities of bargaining power. From a rational perspective, what really matters is a parties' BATNA, ie their best alternative to a negotiated agreement. 

If the only offer on the table is better than your BATNA, then it is rational to accept the offer, even if it seems unfair. Like the monkeys in the video linked above, the rational choice is to accept the cucumber rather than nothing, even if the other monkey is getting grapes. 

Of course, it may be more complicated than this. The BATNA may not always be easy to define, and principle of fairness my hold some value in itself for example because it allows you to save face or prevents you from setting a bad precedent.

However, recognising this cognitive limitation can have other implications as well. For example it can help a negotiator in a weaker position to claim more value. Both sides of a negotiation are likely to be susceptible to this concept of fairness and therefore arguments framed this way can be very persuasive.

 

Conclusion

The human mind is an amazing machine, but it has its limitations. Understanding these limitations and cognitive biases can help negotiators to act more rationally and achieve greater value overall in the long term. 

The examples above are just a few applications of cognitive bias, but there are many many more. Negotiators and theorists have also developed a range of techniques and principles to help overcome these biases, or to use them to your tactical advantage for example the anchoring effect, decision trees and framing. 

If you'd like to learn about about negotiation theory, skills and techniques such as these, click the big green button below to explore Mediator Academy's massive video library.

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Topics: Negotiation

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