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UNDERSTANDING COGNITIVE
BIASES – IMPACT ON
NEGOTIATION
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JIBC
November 5, 2018
Nancy Cameron, Q.C.
CRITICAL CONCEPTS

Difficult for us to make large,

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important, life-changing
decisions because we are all
susceptible to a formidable
array of decision biases
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WHEN YOU FLIP YOUR LID

STOP

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COGNITIVE BIASES AND DECISION
MAKING
 Bias towards certainty
 Optimism bias

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 Loss aversion (risk aversion)

 Status quo bias

 Loss frame

 Anchoring effect

 Confirmation bias

 Endowment effect

 Fear and Anger – implications for practice

 Priming for values


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CERTAINTY BIAS
 We are eager for certainty

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 Insufficient information or too much ambiguity,
and our amygdala is activated.

 Thoughts contain both a verbal component and


an underlying feeling. We have limited control
over the feeling component.

 We tend to believe those who express certainty


over those who express some doubt or less
certainty. 5
THE FEELING OF CERTAINTY
 The brain provides us with a wide variety of
subjective feelings of reward, ranging from
hunches, gut feelings, intuitions and suspicions,

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that we are on the right track to a profound sense
of certainty and utter convictions…those feelings
are qualitatively as powerful as those involved in
sex and gambling.” Dr. Robert Burton, former chief of
neurology, UCSF-Mt. Zion Hospital

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CHALLENGER STUDY
IMPLICATIONS FOR OUR WORK

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OPTIMISM BIAS
 Tend to be overly optimistic about the likelihood
of positive events

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 Underestimate the likelihood of negative events

 Not universal, people also overestimate their


chances of experiencing very rare events, both
positive and negative

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LAWYER’S ABILITY TO PREDICT CASE
OUTCOMES
Lawyer's Minimum Goals for Settlement
50%
45%

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40%
35%
30%
25%
Lawyer's Minimum
20%
Goals for Settlement
15%
10%
5%
0%
Met min. Exceeded Did not
goal meet 9
OUTCOME PREDICTIONS
 Experience didn’t matter (that is, the more
experienced lawyers were not better able to
predict)

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 Some gender difference, with female lawyers less
inclined to overconfidence
 Priming lawyers by asking them to generate
reasons why they might not meet their minimum
goals did not reduce overconfidence

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POSSIBLE EFFECTS OF OPTIMISM BIAS
 Overestimate degree of control
 Overestimate odds of future success

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 People also overestimate their chances of
experiencing very rare events (both positive and
negative)
 Brain does not like ambiguity

 Depressives tend to be more accurate and less


overconfident in their assessments of the
probabilities of good and bad events occurring to
others, but they tend to overestimate the
probability of bad events happening to them.
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STATUS QUO BIAS
WE ARE WIRED TO PREFER THE STATUS QUO

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FRAMING FOR STATUS QUO
 You are chief of the
governor’s task force,
considering options for

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increasing the
capacity of the state’s
prisons.

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STATUS QUO BIAS
WHAT WILL PEOPLE CHOOSE?

32% Town A 68% Town B 65% Town A 35% Town B

Build a new prison in Expand the current

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 
Town A (sparsely prison in Town A
settled) to house 1500 (sparsely settled) to
prisoners at a cost of house 1500 prisoners at
$140 million. a cost of $140 million.
 Expand the current  Build a new prison in
prison in Town B Town B (where the
(where the population population is densely
is densely settled) to settled) to house 2000
house 2000 prisoners prisoners at a cost of
at a cost of $150 mill. $150 mill. 14
DISPUTE RESOLUTION AND
STATUS QUO BIAS
 Much of our work will call up client’s preference
for the status quo

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 Sometimes the frame of litigation is about
maintaining the status quo vs. changing the
status quo
 Maintaining the status quo for one person can
look like changing the status quo for someone
else
 Sometimes it’s impossible to maintain the status
quo for anyone
 Be particularly attentive to how matters are
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framed
RISK AVERSION
 Risk aversion is another variation of
our bias towards certainty.

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 We tend to prefer a deal with a more
certain, possibly lower, expected payoff
that one with an uncertain payoff
 People’s degree of risk aversion varies

 Be aware of your own risk aversion and


how that colours your advice to clients
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LOSS AVERSION

 The emotional experience of loss activates the

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amygdala, so people experience loss differently
and more strongly than they experience gains.

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LOSS FRAME

 Because of loss aversion and status

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quo bias, how we frame choices is
very important.

 Framingto loss activates the


amygdala

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HERE’S $50: CHOOSE ONE OF THE
FOLLOWING

42% choose A 62% choose A

Option A – 40% Option A – 40%

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 
chance to keep the chance to keep the
whole $50, 60% you whole $50, 60% you
lose everything lose everything

 Option B – The sure  Option B – The sure


thing, you keep $20 thing, you lose $30

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AMYGDALA ACTIVATION
 All subjects had amygdala activation in the loss
frame, including those that were not persuaded
to make a different choice because of the loss

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frame (that is, they were able to resist the loss
frame to choose the more certain deal)

 The group that resisted the framing effect also


had strong activity in the prefrontal cortex.

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ANCHORING EFFECT - PRIMING
 Occurs when people rely too much on specific
information to govern their decisions

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 Can occur even though the information has no
relation to the decision being made

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YES, EVEN JUDGES PRONE TO ANCHORING
High Anchor Low anchor
(months) (months)
Study 1 (Q higher or 33 25

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lower than X?)
Study 2 (Consider 6 4
the requests of
prosecutors, defence,
which are entirely
random
Study 3 (dice) 8 5

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THE ENDOWMENT EFFECT
 We over value what we have, and consider giving it up a
loss

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CONFIRMATION BIAS
 Because the brain seeks certainty, we tend to
seek out information that confirms what we
already believe.

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FEAR AND ANGER
 Evoking anger can increase feelings of certainty
and individual control.

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 Evoking anger can lead people to become more
punitive in their judgments even if the situation
which caused the anger is unrelated to what they
are judging.
 Evoking fear can enhance feelings of uncertainty
and loss of control. Cortisol levels remain
heightened for an extended period of time

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TO REDUCE STRESS IN CONFLICT
 Heighten predictability
 As much as possible, prepare for any adverse

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situations that may be encountered
 Heighten appraisals of individual control

 Name it to Tame it – labeling feelings when a


source is an outside source lowers its impact
 Suppression is not helpful – try reappraisal
instead (seeing the stressor from a different light)

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copyright Nancy Cameron
A SELECTION OF MY
WRITTEN WORK IS POSTED
ON MY WEBSITE
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www.Nancy-Cameron.com