Avoiding Decision Traps

Most negotiators believe that they are rational. In reality, many negotiators systematically make errors of judgment and irrational choices. It is important for you to understand and try to avoid making these common errors, as they lead to poor decision-making.

Making the right decisions

Understanding the decision traps that negotiators can fall into will help you avoid making the same mistakes yourself, and may allow you to use the other party’s errors to leverage your own power. To avoid decision traps or to use them to your advantage:

  • Do not hesitate to reverse your original decision and cut your losses; create an exit strategy even before you get involved in the negotiation process.

  • Take the opportunity to set a benchmark that could give you an advantage when your counterpart is ill-informed, but be aware that they could do the same to you if you yourself are not fully informed.

  • Engage a trusted expert who will challenge your overconfidence in your ability to negotiate and put pressure on you to do a reality check.

  • Make sure that your offer is based on solid research. When buying, equip yourself with some security by demanding a performance guarantee of the product.

  • Invest time and energy in looking for information that is not easily available. You will often find accessible information that can improve your position.

  • Present information more or less vividly to influence others, but be wary of overvaluing information that is attractively presented to you.

  • As a negotiator, be aware of how the other party frames the situation and presents its offers.

  • Approach each negotiating event as a unique case. They are never identical.

Understanding decision errors

Table
ErrorDescription
Non-rational escalation of commitment

  • Acting contrary to your self-interest by increasing your commitment to an original decision, despite the fact that this decision produces negative outcomes (“throwing good money after bad”).

Anchoring and adjustment

  • Using a faulty anchor as a benchmark from which to make adjustments and decisions. An ill-informed home-buyer, for example, may use the seller’s asking price as an anchor for their counteroffer, rather than solid due diligence on home values.

Overconfidence

  • Believing that you are more correct and accurate than you actually are. This leads to an overestimation of your power within the negotiation, the options open to you, and the probability of your success.

The winner’s curse

  • If you settle quickly on a deal when selling, feeling that the “win” was too easy and that you could have got more from the deal.

  • If you settle quickly on a deal when buying, thinking “I could have got this for less” or “What is wrong with this item? I must have got a bad deal.”

Information availability bias

  • Making a decision based on limited information, even though information is readily available or would have been available if enough effort had been put in to finding it.

Vividness bias

  • Recalling and assigning more weight to information that was delivered in a vivid fashion, and giving less weight to equally important, but dull, information.

Framing and risk

  • Making decisions based on how the issues were framed (for example, a glass may be described as being half empty or half full). Risk-averse negotiators are more likely to respond positively to offers that are framed in terms of losses, for example, because they are afraid of losing out; risk-seeking negotiators, by contrast, will respond slowly, because they are willing to wait for a better offer.

Small numbers bias

  • Drawing a conclusion based on a small number of events, cases, or experiences, believing that your limited experience allows you to generalize from it.


TIP

To avoid feeling that you have not made the best possible deal, never accept the first offer, even when it is a great offer. Always negotiate a little.

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