OBS220: The Mind and Heart of The Negotiator

Chapter 8
Power

Power in a negotiation can be analyzed in terms of four vantage points: potential power, perceived
power, power tactics, and realized power.
• A negotiator’s potential power is the underlying capacity of the negotiator to obtain benefits
from an agreement. It is a function of the counterparty’s dependence on you.
• Perceived power is a negotiator’s assessment of each party’s potential power, which may or
may not align with reality.
• Power tactics comprise what’s commonly studied in negotiation behavior and refer to the
behaviors designed to use or change the power relationship.
• Realized power is the extent to which negotiators claim benefits from an interaction.

Sources of Power
Negotiators can garner power from several sources.

BATNAs as Power
When negotiators have an attractive BATNA, they have more power than if they have an unattractive
BATNA. It is imperative that negotiators cultivate and improve their BATNAs prior to negotiating, by doing the
following:

• KEEP YOUR OPTIONS OPEN. Keep your options open even after you have come to the
negotiation table because negotiations could break down for a variety of reasons at any point
prior to mutual settlement.
• SIGNALING. Negotiators should signal that they have a BATNA, without revealing its exact value.
However, alluding to options you do not actually have is misrepresentation, which is unethical. It
is not misrepresentation to signal to the other party that you have other (attractive) alternative
courses of action.
• RESEARCH THE COUNTERPARTY’S BATNA. Do not leave any stone unturned when attempting to
assess the counterparty’s BATNA. Start your research well before the negotiation begins. Do not
wait until you get to the negotiation table.

Symmetric vs Asymmetric Power

One party has considerately more power as compared to the other party. Such situations are
characterized by power asymmetry. In a simulated employment negotiation, three types of power
balance were investigated: symmetric high-power negotiators, symmetric low-power negotiators, and
asymmetric power negotiators.
• Symmetric high-power dyads, value creation (integrative outcomes) was associated with
increased mutual accommodation.
• Low-power dyads, value creation was associated with greater contentiousness.
• Asymmetric-power dyads maximized value creation when a neutral stance was adopted;
neither over-using or under-using accommodation or contentiousness.
Perspective Taking

Power propels negotiators to achieve their goals, which may be egocentrically biased, and leads to more
inequitable information sharing and outcomes. When powerful negotiators engaged in perspective-
taking, negotiators shared more information, developed more accurate judgments, and negotiated
better outcomes.

Powerlessness

A common belief is that a person “who has nothing to lose” may have an advantage in some situations.
A negotiator with a weak alternative may be unwittingly anchored by their low-value alternative and
reduce the value of their first offer.

Status

Power is the potential a person holds to influence others successfully; the capacity or ability to direct or
influence the behavior of others or the course of events. Status is the relative social position or rank
given to people or groups by others. Status may be formal, like an organizational title (e.g., CEO), or
informal. Power and status have similar positive effects on how dominant we think someone is.

Power has a negative effect on how warm we think someone is, but status moderates this “power
penalty.” High-status people, regardless of their actual power, are perceived positively—dominant and
warm—but high-power, low-status individuals are judged most negatively—dominant and cold.

Status and Negotiation Performance

Groups of high-power individuals performed worse because they fought over relative status in the
group, were less focused on the task, and shared information less effectively. Another study found that
role-based power facilitates performance, but only when the negotiation is diagnostic in ability and
pressure filled.

Primary Status Characteristics refer to indicators of legitimate authority (rank, degree, title).

When people of equal status negotiate, people often pay attention to Secondary Status Characteristics,
which are cues and characteristics that have no legitimate bearing on the allocation of resources or on
the norms of interaction, but nevertheless exert a powerful influence on behavior. Also referred to as
pseudostatus characteristics, these include sex, age, ethnicity, status in other groups, and cultural
background. The three most common secondary status characteristics are gender, age, and race.

Negotiation Ethics

Ethics are a manifestation of cultural, contextual, and interpersonal norms that render certain strategies
and behaviors unacceptable. Negotiation creates incentives for people to violate ethical standards of
behavior. Ethics are often a problem in negotiations, because of psychological tendencies that foster
poor decision-making. Most often, people believe they are behaving ethically, but due to self-serving
tendencies, problems result and negotiators cry foul. Well-meaning people engage in unethical
behaviors without awareness that they are doing so.
Seven-Factor Model of Ethically Questionable Behavior

Lewicki and his colleagues identified seven ethically questionable strategies in negotiation, including:
traditional competitive bargaining, attacking an opponent’s network, making false promises,
misrepresentation, inappropriate information gathering, strategic misrepresentation of positive
emotion, and strategic misrepresentation of negative emotion.

ACTUAL BEHAVIOR. It is one thing for negotiators to indicate their attitudes about ethically questionable
behaviors; it is quite another to examine how negotiators behave in high-stakes negotiation situations.
Given that many negotiators do not regard traditional competitive bargaining to be unethical, it is
reasonable to expect that those behaviors might be more pervasive than the other ethically
questionable behaviors. The use of competitive strategies increased the likelihood of impasse, as well as
improved individual value-claiming in cases where agreement was reached.

PERSONALITY DIFFERENCES. There are several predictors of the extent to which a negotiator will engage
in ethically questionable negotiation behaviors, including their attitude toward competitive unethical
tactics, the early use of competitive unethical tactics, and the behavior of the counterparty.

Personality differences in empathy and perspective-taking differentially affect the use of unethical
strategies, such as lies and bribes. Empathy discourages attacking the opponent’s network,
misrepresentation, inappropriate information gathering, and feigning emotions to manipulate the other
party. Unethical bargaining is more likely to be deterred by empathy, as opposed to perspective-taking.

Negotiators who suppress their emotions are more likely to misrepresent information. People who have
entity views are more likely to deceive others than those with incremental views (i.e., believe that skills
and traits are malleable). People with entity views are less morally engaged and more likely to justify the
use of unethical tactics.

CULTURAL DIFFERENCES. Cultural norms affect the perceived ethicality of different negotiation
behaviors. Three types of ethically questionable behaviors emerged: pretending, deceiving, and lying.
Vertical individualism was positively related to pretending, deceiving, and lying; conversely, horizontal
collectivism was negatively related to all three behaviors.
GENDER DIFFERENCES. Investigations point to gender differences in ethics, with women acting more
ethically than men. Studies reveal that men set lower ethical standards than do women in negotiations.
The male pragmatism hypothesis suggests that men, more so than women, are motivationally biased in
setting ethical standards. Men are more egocentric in their ethical reasoning and grant themselves more
leniency in ethics than women, and consequently exhibit more moral hypocrisy than women.

Lying
Given statement may be defined as fraudulent when the speaker knowingly misrepresents a material
fact upon which the victim reasonably relies, and the fact causes damage. Unpacking this definition, we
find several key aspects to lying:
The speaker is aware he or she is misrepresenting information that information is regarding a material
fact; the other party relies on this fact, by doing so, is damaged in some way—economically or
emotionally.

1) Positions. Are the stated demands made by one party to another. Negotiators are under no
obligation to truthfully state their position. However, it is usually wise to clearly signal your
position. Whereas lying about one’s position is not advised, many negotiators exaggerate their
position.

2) Interests. Recall that interests are the underlying “whys” behind negotiators’ positions. In
negotiation, it is generally assumed that people are self-interested with no “general duty of
good faith.”

3) Priorities and preferences. A negotiator is entitled to his or her preferences, however

idiosyncratic they might be. A negotiator who misrepresents his or her interests is not lying
about a material fact. “Estimates of price or value placed on the subject of a transaction and a
party’s intentions as to an acceptable settlement of a claim” are not material facts for purposes
of the rule prohibiting lawyers from making false statements to a third person. Passive
misrepresentation occurs when a negotiator does not mention true preferences and allows the
other party to arrive at an erroneous conclusion.

4) BATNAs. A negotiator’s BATNA is material and therefore, subject to litigation. The implication:
don’t make up offers that don’t exist! Negotiators who falsify offers that don’t exist (or even
allude to them) are bluffing.

5) Reservation prices. A negotiator’s reservation price is the quantification of a negotiator’s

BATNA. A negotiator’s stated reservation price (the least or most at which he or she will sell or
buy) is not a material fact per se, and thus, whereas it may be reprehensible to lie about one’s
reservation price, it is not legally unethical.

6) Key facts. The falsification of information is unethical (and subject to punishment).

Situational Influences

The social context strongly shapes negotiators’ willingness to behave unethically. One investigation
examined how three contextual variables: regulatory focus, power, and trustworthiness shifted
negotiators’ ethical thresholds. Three patterns emerged:
1) Low power inhibited and high power activated deception.
 2) Promotion-focused negotiators favored sins of omission, whereas prevention-focused
negotiators favored sins of commission.
3) Promotion-focused negotiators’ decision to deceive is determined by moral pragmatism, but
prevention-focused negotiators’ deception is determined by opportunism.

Trust between the negotiators and their strategies:

o Mixed-sex dyads, negotiators consistently increased their use of deception when trust was low,
and their opponent used an accommodating strategy.
o In all-female dyads, deception increased when a competitive strategy was combined with low
trust, or an accommodating strategy was combined with trust.
o In all-male dyads, deception was not affected by trust or strategy.

Other situational factors that may lead people to engage in deception include: the lure of temptation,
uncertainty, powerlessness, and anonymity of victims. The more negotiators can gain economically by
lying, the more likely they are to lie. Perspective taking or putting oneself in the other party’s shoes is
most often regarded to be a key to successful relationships.

Costs of Lying

Several costs are associated with lying, the first being that the liar can be caught and face criminal
charges. Even if the liar is not caught, a negotiator’s reputation and trustworthiness can be damaged.
Lying also may not be strategic: because a negotiator who lies about his or her reservation price
effectively decreases the size of the bargaining zone, and the probability of an impasse increases.

Perceptions of Liars

Once a negotiator knew that the counterparty was lying, their trust in the counterparty would be
severely tainted. When negotiators hold incremental theories (believe that negotiation abilities are
malleable), they are more likely to lose their trust in the counterparty following deception. People who
hold entity theories (believe that negotiators’ characteristics and abilities are fixed), maintain their first
impressions of that person, even after learning that they were deceived.

Bad-faith bargaining is the term used to refer to negotiators who make offers, and then either retract
them or fail to follow through with them. Once a negotiator puts an offer on the table, he or she should
not retract it. Even so, negotiators may need to retract offers when a mistake has been made.

Good-faith bargaining refers to people (and companies) who promise to honor verbal promises.

Sins of Commission and Omission

Lying by omission is the passive omission of relevant information; lying by commission is the active use
of false statements. Sins of commission (active lying) are regarded as more unethical than sins of
omission.

Paltering is the active use of truthful statements to convey a misleading impression. Paltering is
common in negotiations, and many negotiators prefer to palter than to lie by commission. Palterers are
likely to claim additional value, but risk impasse and harming their reputations. Paltering may increase
conflict fueled by self-serving interpretations because people regard palterers to be particularly
unethical.

Bidding Wars

A bidding war is a situation in which multiple negotiators compete against one another in a competitive
fashion. Bidding wars are essentially social dilemmas because parties have an incentive to maximize
their own interest, but all may ultimately suffer. It occurs in housing markets, job markets, and other
markets.

Detecting Deception in Negotiation

It is difficult to detect deception in negotiation because parties often conceal behavior that they think
will indicate they are lying and at the same time, engage in behaviors that they feel will make them
appear trustworthy. One physiological cue that is not under direct control is pupil dilation, with the idea
that dilated pupils are perceived positively, but constricted pupils are perceived negatively.

Making Ethical Decisions

It is important for negotiators to be mindful about their own ethical behavior. A key reason is due to
bounded rationality, such that even well-intentioned managers might make unethical decisions due to
cognitive errors.

BOUNDED ETHICALITY Bounded ethicality refers to the limits of people to make ethical decisions
because they are either unaware of or fail to process information fully and deliberately.

RESISTING TEMPTATION Negotiation poses a self-control conflict between pursuing short-term

economic benefits by behaving dishonestly versus pursuing long-term relational benefits by being
honest. Factors that facilitate self-control should lead negotiators to behave more ethically. When
negotiators consider several decisions simultaneously and think about their future self, their temptation
to behave dishonestly is reduced.

Best Practices

1) The front-page test.

The front-page test, or light-of-day test, poses the following ethical challenge to negotiators:
• Would you be completely comfortable if your actions and statements were printed in full on the
front page of the local newspaper or reported on the evening news?
• How would I feel if I had to stand before a board of inquiry and describe what I have done?
Conceptualized as thinking about one’s behavior, promotes more ethical decision-making, as compared
to self-interested conversation.

2) Role modeling.
• Would I advise others to do this?
• Would I be proud to see my child act this way?
• What if everyone bargained this way?
• Would the resulting society be desirable?
 3) Third-party advice.
It is wise to consult a third party to see how that person regards your planned behavior. When
consulting the third party, do not reveal your own role in the situation. Describe the situation in the
third-person voice.

4) Strengthened bargaining position.

Negotiators who are adequately prepared will be less tempted to lie.

Responding to unethical Behavior

The relatively high incidence of ethically questionable behavior in negotiation leads to the question of
how to respond to unethical behavior.

NEUTRALIZING. They identify 12 behaviors that can neutralize the counterparty’s unethical behavior,
thereby improving the likelihood of reaching an integrative outcome.
• Promising the counterparty goal achievement. • Convincing the counterparty to
• Convincing the counterparty of goal progress. recognize interpersonal similarities.
• Leading the counterparty to believe the goals • convincing the counterparty to identify
are linked. with your organization.
• Suggesting limited options for the • Pointing to shared links in your social
counterparty. and professional networks.
• Suggesting you have other alternatives. • Offering future personal and social
• Promising long-term business opportunities. support.
• Suggesting serious legal implications for the • Proposing to be a facilitator of valued
counterparty. social and business networks.

SUSPICION. Negotiators who are suspicious are more effective at the bargaining table because a variety
of adaptive defense mechanisms operate. People who are suspicious of the counterparty are better able
to guard against influence strategies.

SIGNAL RISK. It is important to recognize that negotiators take risks when considering or contemplating
ethically questionable behavior. These risks involve:
o Risk to immediate or short-term goals.
o Risk to immediate or short-term relationships.
o Risk to future or long-term goals.
o Risk to future or long-term relationships.
By signaling these risks to the counterparty in a negotiation, a negotiator can educate the counterparty
about the disadvantages of unethical behavior. The negotiator may minimize the likelihood that the
opponent will engage in unethical behavior.

Reputations are socially constructed labels that provide representations that organize our perceptions
of other people. Reputations are based on a combination of first- and second-hand information. First-
hand information is based on our direct experience with someone. Second-hand information is based on
what we hear about someone else’s experience with someone.
Halos and Forked-Tails

Reputations are judgmental, consistent, immediate, and inferential. The reputations assigned to others
tend to be highly evaluative, meaning that they are either “good” or “bad.” Once we decide that
someone is trustworthy, other qualities about this person are perceived as consistent with this favorable
impression.

This tendency gives rise to the halo effect, which is the propensity to believe that people we trust and
like are also intelligent and capable. The forked-tail effect means that once we form a negative
impression of someone, we tend to view everything else about them in a negative fashion.

Reputations in Negotiation Communities

People who are more socially networked are more likely to develop reputations quickly that are difficult
to change. “Deceptive cheap talk” that is discovered by the other party negatively affects a negotiator’s
outcomes. People who discover that they have been deceived may seek retribution, even though doing
so may be costly to them.

• Liar-manipulator (will do anything for advantage)

• Tough but honest (very tough and makes few concessions but will not lie)
• Nice and reasonable (makes concessions)
• Cream puff (makes concessions and is conciliatory regardless of what the other does)

Distributive vs Integrative Negotiations

• Novice negotiators who interact with expert negotiators with distributive reputations evaluate
the counterparty more negatively and use more distributive and less integrative negotiation
strategies, ultimately reducing joint gains.
• Conversely, when novices are told the expert counterparty has an integrative reputation, the
novices disclose information about their interests, needs, and priorities which results in higher
joint gains.

BATNAs and Reputation

Negotiators who have attractive BATNAs can afford to be tougher and make fewer concessions in a
negotiation.

Reputations and Self-serving Views

A key aspect to remember is that negotiators’ self-perceived reputations are bound to be more
favorable than their actual reputation, because of the self-serving bias.

Just a reminder: My notes are a basic reference of the textbook, refer to the textbook for more
information.