How Size Matters in Negotiating

By Dean Kelley,2014-03-15 09:56
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How Size Matters in Negotiating



     Professor of behavioral science George Wu suggests that most people would do better in negotiation by asking for more. Yet bargainers persist on making the same mistake again and again because it’s hard to learn that they would have done better by being more aggressive, Wu told members of the student-led Managerial Effectiveness Group, at a lunchtime meeting on February 12 at the Harper Center.

     Wu outlined some of his research in negotiating, concluding that the best deals are made when negotiators sense the other side’s limits. “Hopefully, you walk into a negotiation knowing your reservation price, or bottom line,” he said. “But it’s just as important to know the other side’s reservation price. The question is: ‘How big is the bargaining zone?’ ”Wu’s research demonstrates a “small pie” bias at work in distributive bargaining: negotiators tend to underestimate the size of the bargaining zone.

     Bargainers who walk into a negotiation with a mistaken belief that the bargaining zone is small there is not much to split tend to follow up with a first offer

    that is in the bargaining zone. “Negotiators typically start out too conservatively,” he said. “You can usually recover from extreme first offers, but you can’t recover when you ask for too little.” Wu adds: “When bargainers make first offers that are in the middle of the bargaining zone, it’s hard to learn that there was more to be had.”

     “Most of you would do better by making more aggressive first offers,” Wu suggested. “Of course, a first offer can be too extreme and insulting. You should

    be able to defend that offer with a straight face.” When asked how he negotiated, Wu noted that he sometimes starts by offering merchants in foreign markets nothing for their wares, “They ask, ‘What do you want to pay?’ ” Wu explained. “Well, I’d like to pay nothing. They know that I don’t expect to pay that, but it is what I want to pay.” That sort of extreme offer is rarely appropriate for business negotiations, but Wu said making first offers that seem extreme is the best way to start.

     Research such as Wu’s is needed, according to first-year student Greg Moro,

    “What’s there is limited,” he said. “But it’s important to understand how to value success.”

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