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The Impact of Psychological Factors On Bargaining Interactions

By Charles B. Craver June 11, 2011

Complete article originally published in the June issue of Alternatives to the High Cost of Litigation, available online to current subscribers.

Why is the Other Side Doing That?

The task: Identifying behaviors on your adversary’s side of the table.

The purpose: Getting what you want in the negotiation.

Isn’t this overanalyzing? You are learning to spot the behaviors, and then use the knowledge to win, or to win-win—but not for creating a full psychological profile of your opponent.

When individuals negotiate, various psychological factors positively and negatively influence their interactions. People who ignore the impact of these phenomena may not appreciate the degree to which these considerations influence their encounters. On the other hand, negotiators who understand the influence of these factors can use them to their own advantage.

Here is a review of seven key factors and how to account for them.

BODY POSTURE AND SPEECH PATTERN MIRRORING

When people negotiate, they tend to respond more favorably when others exhibit body postures and speech patterns similar to their own. Negotiators who hope to take advantage of this factor can work to mirror the postures and speech patterns of the individuals with whom they are interacting.

When opponents lean back in their chairs, skilled adversaries assume the same posture. If opponents cross one leg over another, these persons cross the same leg over the other leg to reflect the posture of those people. When adversaries lean forward in their chairs, these negotiators lean forward in a similar manner.

Skilled negotiators can similarly mirror the speech patterns used by opponents. When those persons speak more slowly, they speak more deliberately. When adversaries speak more rapidly, they speed up. Negotiators can also reflect the speech tone of opponents. When those people elevate their voice pitch, they can do the same.

When individuals speak, they usually employ one of three sensory preferences. Some use a visual orientation, and they describe their thoughts visually.

For example, they ask if others can picture what they are saying, or they indicate that they can see what someone else is requesting. These persons tend to respond more favorably to negotiators who respond using a similar orientation. It thus helps if others respond to these persons by describing their desires graphically. Alternatively, they might say that they can see what the other side is concerned about.

Some individuals have an auditory orientation, and they use words to describe auditory perceptions. They might ask opponents to listen to their concerns or indicate that the other side’s proposal has rung a bell with them. They may ask adversaries to voice their opinion about the subject of their discussions.

Negotiators with this orientation react most favorably to others who use a similar frame. For example, they seek someone who says that he or she hears their concerns, or who suggests that their proposal should create a large bang in the business community.

The third group tends to exhibit a kinesthetic/feeling orientation. These are people who feel or sense things. They might indicate that a proposal smells bad or leaves a bad taste in their mouth. They tend to rely on their gut feelings.

To appeal most effectively to individuals with this orientation, negotiators should reflect their kinesthetic/feeling orientation. They might indicate that a new offer feels good to them, or suggest why they are not comfortable with that proposal.

ANCHORING

Some individuals commence bargaining encounters with modest proposals hoping to generate reciprocal behavior by their opponents that will generate pleasant and cooperative win-win interactions.

Opening offers that are overly generous to adversaries are likely to have the opposite effect due to the impact of anchoring. When people receive more generous offers than they anticipated, they question their own preliminary assessments and increase their own aspirations.

They begin to think that they will be able to obtain more beneficial results than they initially thought possible, and they move psychologically away from the other side. They thus make opening offers that are more favorable to their own side.

It is important for parties commencing bargaining encounters to plan opening offers that favor their own side, but which can be logically explained to provide them with credibility.

In my Legal Negotiating class, students get identical fact patterns pertaining to a tort claim. The students are told that they all represent the defendant, and they are asked two questions. What is the first offer you plan to make in response to the plaintiff’s initial demand? And how much do you think you will finally have to pay to resolve this claim?

Half of the students are told the plaintiff has demanded $100,000, and half are told the plaintiff has demanded $50,000. The half facing the initial $100,000 demand plan higher opening offers and think they will have to pay more to resolve the claim than the students facing the $50,000 demand.

GAIN/LOSS FRAMING

Individuals can significantly enhance the probability of opponent acceptance by the manner in which they frame their offers.

People tend to be risk averse when they must choose between a sure gain and the possibility of a greater gain or no gain. But they tend to be risk takers when they have to choose between a sure loss and the possibility of a greater loss, or no loss.

I demonstrate this to students and to attorney-practitioners in my Legal Negotiation courses by asking the following questions:

1) Assume you must choose between the following two options:

  • If you select Option 1, you receive $100.
  • If you select Option 2, there is a 20% probability you will receive $500 and an 80% probability you will receive nothing.

Most individuals prefer the certain $100 gain over the risk of no gain associated with Option 2.

2) Assume you must choose between the following two options:

  • If you select Option 1, you have to pay $100.
  • If you select Option 2, there is a 20 percent probability you must pay $500 and an 80 percent probability you have to pay nothing.

Most persons select Option 2 in this scenario. They are unwilling to accept the sure loss, and prefer the alternative that may enable them to avoid any loss—despite the fact this choice may cause them to lose more.

Negotiators who are formulating offers should strive to frame their offers as sure gains—instead of sure losses—to their opponents. In almost all business dealings, whether one is the buyer or seller, or the licensor or the licensee, negotiators can articulate offers that appear to be gains to the offer recipients. This factor increases the likelihood their offers will appeal to the other parties.

Gain/loss framing is especially relevant with respect to lawsuit settlement discussions. Defendants almost always appear to be offering sure gains to plaintiffs—and their attorneys, who are usually compensated on a contingent fee basis—causing both plaintiffs and their counsel to be hesitant to decline certain gains in favor of possibly greater gains or no gains.

On the other hand, plaintiffs appear to be demanding what seem to be sure losses from the perspective of defendants, causing them to be more risk taking in an effort to avoid the certain losses.

How can plaintiffs try to reverse this impact? If they frame their offers by suggesting that for $XX, the defendant’s problems will be resolved, they may be able to make their demands seem like “gains” to the defendants.

Complete article, including analysis of the Endowment Effect, Regret Aversion and more, is available online to current subscribers.

CLE FROM CRAVERONLINE

Author Charles Craver recently brought his negotiation and mediation expertise to a live online continuing legal education session for Alternatives’ publisher, the CPR Institute. The one-hour session, Craver’s fourth for CPR and which provides Ethics CLE credit in jurisdictions nationwide, is now available for on-demand credits at WestLegalEdcenter.com, where the CPR Institute is an accredited provider. For more information, see details on the CPR Institute’s online seminars in the CPR News item on the Annual Meeting in this issue.

The author is the Freda H. Alverson Professor at the George Washington University Law School in Washington, D.C. He is the author of “Effective Legal Negotiation and Settlement” (6th ed. 2009 LEXIS); “Skills & Values; Legal Negotiating” (2009 LEXIS), and “The Intelligent Negotiator” (Prima/Crown 2002). He is coauthor of “Legal Negotiating” (2007 Thomson/West) and “Alternative Dispute Resolution: The Advocate’s Perspective” (4th ed. 2011 LEXIS).

 


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