Negotiations: Using Bias to Your Advantage

We continue our theme this week by focusing on negotiations. When many of us enter negotiation, we have some cognitive biases that we bring along with us to the table. Russell Korobkin of UCLA and Chris Guthrie at Vanderbilt University believe you can turn these biases into tools of persuasion. They believe knowing the biases allows them to be used to your advantage.

Bias #1: Anchoring Effect

Korobkin and Guthrie suggest you enter negotiation with an extreme offer. If you think your case is worth $150,000, go in asking more than that. Your extreme offer will influence the entire process. The other side will start to think that they were wrong in choosing a lower amount, even if their amount was more “appropriate.” If you are on the opposite end of this negotiation, you will know that the other side has only put up an extreme offer to persuade you to increase your offer. Do not fall into their trap.

Bias #2: Availability Bias

The availability bias is someone’s tendency to rely on readily available information, therefore not going out on their own to seek extra information from different sources. Since you know the other party is susceptible to the availability bias, you can carefully choose the comparisons you make during negotiations. You may only want to compare situations to your current problems for a more appropriate settlement. This bias may make more sense in the legal context. If the defendant cites a similar case where the judge rewarded a very small amount, this can influence the judge’s decision. In negotiation, citing other negotiation meetings and their outcomes may help your case.

Bias #3: The Importance of Framing

When you are trying to reach a negotiated settlement, it is always important to consider how you frame the negotiation in terms of gains and losses. You know each party comes in thinking they will either win or loose, but you must frame the situation in a way that turns the negotiation into a win-win situation for both parties. Not only will taking this approach build trust at the negotiating table, it may persuade the other parties to become risk averse. If the other party thinks you are taking their needs into consideration as well, they will be more likely to reach a settlement.

Bias #4: Contrast Effects

This effect could also be renamed the Options Effect. The key here is to provide options in order to offer a contrast. Let’s say you make a flat offer to settle a case at $30,000. This one option may not seem attractive, but it will seem more attractive when it is contrasted with other offers. Rather than making that one offer you can say, “You have three options to choose from: $30,000 immediately in cash, $10,000 annually for the next three years, or a $30,00 payment to charity.” When compared to these options, the defendant will definitely think the $30,000 cash offer is the best. By utilizing the contrast effect, the negotiator will not have to compare the amount to a higher price, only other options.

Source referenced: Harvard Law Program on Negotiation

 

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