A literature review of cognitive biases in negotiation processes

Abstract

Purpose\ud – What is the discipline's current grasp of cognitive biases in negotiation processes? What lessons can be drawn from this body of literature? The purpose of this paper is to review and discuss the limited research on cognitive biases in the context of negotiations.\ud \ud Design/methodology/approach\ud – This article reviews research from judgment and decision-making, conflict management, psychology, and management literatures to systematize what we already know about cognitive biases in negotiations.\ud \ud Findings\ud – Decision-making studies have mainly identified 21 biases that may lead to lower quality decisions. Only five of those biases have been studied relating to negotiations: the anchoring, the overconfidence, the framing, the status quo and the self-serving bias. Moreover, negotiation literature has identified five additional biases that affect negotiation processes: the fixed-pie error, the incompatibility error, the intergroup bias, the relationship bias and the toughness bias. Biased behavior differs across cultures and emotional mood.\ud \ud Research limitations/implications\ud – Implications for future research include building comprehensive models of how negotiators can overcome cognitive biases, studying interconnections between different biases, and increasing complexity of the studies to provide practitioners with more practical advice.\ud \ud Originality/value\ud – The literature reviewed in this paper spans diverse disciplines and perspectives. This paper can be a starting point for researchers interested in understanding how cognitive biases affect negotiations. Moreover, it could be a starting point for future research on this field

Risk Attitude towards Mandatory Retirement Protection in Hong Kong: Why Are Risky Investments More Attractive?

“…The large percentage of contributors, who believe that their own investment plans would outperform MPF fund, may root in overconfidence. Overconfidence is a well-documented cognitive bias and has been examined in different disciplines such as bargaining and finance (Benoit & Dubra, 2011;Caputo, 2013;Gervais & Heaton, 2011). Considering the intention of MPF that it provides retirement protection to the public, it is highly important for the under-privileged employees to be aware of the potential risks of their MPF choices, since they will heavily rely on the MPF during their retirement.…”

Building theory on the negotiation capability of the firm: evidence from Ryanair

“…Although we have neglected to present a full longitudinal analysis of Ryanair's negotiation practices, their negotiation behaviors have changed and evolved over their history. Despite on-going controversies in negotiation theory about the exact role of learning and experience in increasing negotiation performance (Caputo, 2013), the body of research, nonetheless, shows that individual negotiation ability is definitely shaped by learning and experience (Ness and Haugland, 2005). One might not become a better negotiator over time, but ability in negotiation is a function of previous 21 engagements.…”

Relevant information, personality traits and anchoring effect

“…The anchoring effect appears to be prevalent throughout human decision processes and has been shown to reliably influence judgments in a variety of domains, other than probability estimates (Plous, 1989;Tversky and Kahneman, 1974), including negotiation (i.e., Caputo, 2013;Galinsky and Mussweiler, 2001;Neale and Bazerman, 1991;Ritov, 1996), legal judgments (i.e., Chapman and Bornstein, 1996), and general knowledge (i.e., Epley and Gilovich, 2001;McElroy and Dowd, 2007;Mussweiler and Englich, 2005;Strack, 1999, 2001;Strack and Mussweiler, 1997). Furthermore, anchoring effects appear viable across most situations for both novices and experts (i.e., Northcraft and Neale, 1987).…”