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Bargaining zone distortion in negotiations: The elusive power of multiple alternatives

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  • Schaerer, Michael
  • Loschelder, David D.
  • Swaab, Roderick I.

Abstract

We challenge the assumption that having multiple alternatives is always better than a single alternative by showing that negotiators who have additional alternatives ironically exhibit downward-biased perceptions of their own and their opponent’s reservation price, make lower demands, and achieve worse outcomes in distributive negotiations. Five studies demonstrate that the apparent benefits of multiple alternatives are elusive because multiple alternatives led to less ambitious first offers (Studies 1–2) and less profitable agreements (Study 3). This distributive disadvantage emerged because negotiators’ perception of the bargaining zone was more distorted when they had additional (less attractive) alternatives than when they only had a single alternative (Studies 1–3). We further found that this multiple-alternatives disadvantage only emerges when negotiators used quantitative (versus qualitative) evaluation standards to gauge the extremity of their offers (Study 4), and when they base their offers on their own numerical alternative(s) versus on opponent information (Study 5).

Suggested Citation

  • Schaerer, Michael & Loschelder, David D. & Swaab, Roderick I., 2016. "Bargaining zone distortion in negotiations: The elusive power of multiple alternatives," Organizational Behavior and Human Decision Processes, Elsevier, vol. 137(C), pages 156-171.
    • Handle: RePEc:eee:jobhdp:v:137:y:2016:i:c:p:156-171
    DOI: 10.1016/j.obhdp.2016.09.001
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    References listed on IDEAS

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    1. Blount, Sally & Thomas-Hunt, Melissa C. & Neale, Margaret A., 1996. "The Price Is Right--Or Is It? A Reference Point Model of Two-Party Price Negotiations," Organizational Behavior and Human Decision Processes, Elsevier, vol. 68(1), pages 1-12, October.
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    4. Swaab, Roderick I. & Phillips, Katherine W. & Schaerer, Michael, 2016. "Secret conversation opportunities facilitate minority influence in virtual groups: The influence on majority power, information processing, and decision quality," Organizational Behavior and Human Decision Processes, Elsevier, vol. 133(C), pages 17-32.
    5. Rebecca J. Wolfe & Kathleen L. Mcginn, 2005. "Perceived Relative Power and its Influence on Negotiations," Group Decision and Negotiation, Springer, vol. 14(1), pages 3-20, January.
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    7. Brooks, Alison Wood & Schweitzer, Maurice E., 2011. "Can Nervous Nelly negotiate? How anxiety causes negotiators to make low first offers, exit early, and earn less profit," Organizational Behavior and Human Decision Processes, Elsevier, vol. 115(1), pages 43-54, May.
    8. Bottom, William P., 1998. "Negotiator Risk: Sources of Uncertainty and the Impact of Reference Points on Negotiated Agreements," Organizational Behavior and Human Decision Processes, Elsevier, vol. 76(2), pages 89-112, November.
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    Cited by:

    1. Lee, Alice J. & Loschelder, David D. & Schweinsberg, Martin & Mason, Malia F. & Galinsky, Adam D., 2018. "Too precise to pursue: How precise first offers create barriers-to-entry in negotiations and markets," Organizational Behavior and Human Decision Processes, Elsevier, vol. 148(C), pages 87-100.
    2. Wolfram E. Lipp & Remigiusz Smolinski & Peter Kesting, 2023. "Beyond the First Offer: Decoding Negotiation Openings and Their Impact on Economic and Subjective Outcomes," Group Decision and Negotiation, Springer, vol. 32(2), pages 395-433, April.
    3. Yossi Maaravi & Aharon Levy, 2017. "When your anchor sinks your boat: Information asymmetry in distributive negotiations and the disadvantage of making the first offer," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 12(5), pages 420-429, September.
    4. Wiltermuth, Scott S. & Raj, Medha & Wood, Adam, 2018. "How perceived power influences the consequences of dominance expressions in negotiations," Organizational Behavior and Human Decision Processes, Elsevier, vol. 146(C), pages 14-30.
    5. Bhatia, Nazlı & Gunia, Brian C., 2018. "“I was going to offer $10,000 but…”: The effects of phantom anchors in negotiation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 148(C), pages 70-86.
    6. Tey, Kian Siong & Schaerer, Michael & Madan, Nikhil & Swaab, Roderick I., 2021. "The Impact of Concession Patterns on Negotiations: When and Why Decreasing Concessions Lead to a Distributive Disadvantage," Organizational Behavior and Human Decision Processes, Elsevier, vol. 165(C), pages 153-166.
    7. repec:cup:judgdm:v:12:y:2017:i:5:p:420-429 is not listed on IDEAS
    8. Brady, Garrett L. & Inesi, M. Ena & Mussweiler, Thomas, 2021. "The power of lost alternatives in negotiations," Organizational Behavior and Human Decision Processes, Elsevier, vol. 162(C), pages 59-80.
    9. Hart, Einav & Schweitzer, Maurice E., 2020. "Getting to less: When negotiating harms post-agreement performance," Organizational Behavior and Human Decision Processes, Elsevier, vol. 156(C), pages 155-175.
    10. Schaerer, Michael & du Plessis, Christilene & Yap, Andy J. & Thau, Stefan, 2018. "Low power individuals in social power research: A quantitative review, theoretical framework, and empirical test," Organizational Behavior and Human Decision Processes, Elsevier, vol. 149(C), pages 73-96.

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