Mind Games: Using Psychological Biases in Negotiations

Posted By Jesse Suarez, Nov 28, 2011

When it comes down to it, you may not be as rational as you think.  Now, if you’re reading a blog on a law school negotiation team’s website, chances are you’re a well-educated individual and fancy yourself somewhat savvy when it comes to deal making.  But, what you may not know is that the person who is most likely to get you to accept deals close to your reservation point is yourself.  There are several psychological phenomena that you should be wary of before sitting at the bargaining table, and, if you’re skilled enough, you may be able to use them to your advantage.   

Highball-Lowball

The first mind trick, and probably most well-known, is anchoring. The anchoring effect occurs when a negotiator begins the distributive conversation with an option that sets the conversation near his or her target. While the original value selection is not very interesting in itself, what is interesting is that the negotiator on the other side of the transaction will often adjust his or her starting position to come closer to that value.  This adjustment affects the numerical range that the conversation will center around.  So, when you’re sitting at a negotiation table and your opponent throws out their first number before you’ve laid your own down, make sure not to fall victim to this trick by sticking to the first offer you would have given.  Otherwise, you’ll be making a concession without being able to use it as leverage later on.  On the other hand, you can take advantage of this by setting the first offer in the negotiation. Just make sure you can support your high or lowball offer with some justification or you may get caught using this trick.

“Supplies Limited! Call Now!”

Another judgment bias, the “availability bias,” concerns the perceived availability of the item that’s up for negotiation. It’s no surprise that if you think that an item is rare, the economist in you will tell you that it’s more valuable than if it is easily accessible.  Moreover, if the deal will be open only for a short period of time, you may put added value on closing a deal immediately and will be more likely to bend from your original position. You can use your knowledge about this bias to your advantage by playing up the rarity of your offer or explaining that it will expire soon.  

Watch Your Ego

Another studied judgment bias is the “egocentric” bias. You’ll probably agree that most people nowadays seem to judge information they receive in a way that confirms pre-existing beliefs, assumes that their actions won’t affect other people, and that supports a positive external presentation of them.  Now, if you think that this phenomenon only happens to other people, then you have demonstrated this bias’ power.  In a negotiation context, this means that both sides of the bar are more likely to believe that a jury or judge would rule in their favor if they can’t come to an agreement.

You can moderate your ego by taking objective standards seriously, focusing on what hard statistics say, and/or using another person to play devil’s advocate while you’re preparing.

“Everybody’s Doing It”

After an offer is put on the table, you’ll often hear negotiators speak about why their offer is reasonable. In doing so, they are attempting to play to the well-studied “framing” bias. Studies show that individuals usually make choices based on some external reference point, such as the perceived “status quo” or known convention.   So, reminding your opponent that “everybody’s doing it” may not be such a sham argument after all. Support your offers with an external reference point that suggest your offer is reasonable, such as the fair market value of a negotiated good.  If your opposition is attempting to frame an offer, be sure to distinguish the negotiated item from the comparison.

Offer Them a Red Herring

Another way to affect a person’s choice is to provide the individual with an extra-option that is designed to illustrate the superior quality of the option you would like them to take. One example is that if you allowed someone to choose between $6 cash and a decent pen, most individuals would take the cash. But, if you offered a third option of a lower grade pen, people are significantly more likely to pick the nicer pen over the$ 6.  So, if you’re offering different packages, consider throwing one in that you don’t anticipate they would take, but is more in line with the choice you would prefer them to take.

While nothing beats preparation before going into a negotiation, on-the-spot strategies such as the ones outlined here can help you psych your opponents in to making agreements more favorable to you or your client.  But, keep in mind, savvy opponents may be trying to use these on you as well!

For more information about psychological short-cuts in negotiations, see Russell Korobkin & Chris Guthrie, Heuristics and Biases at the Bargaining Table, 87 Marq. L. Rev. 795 (2004).