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Cognitive bias in negotiation

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According to according to the writers Lewicki, Saunders, Minton, and Barry (2003), perceptual distortion includes stereotyping, halo effects, selective perception, and projection. Cognitive biases include (1) the irrational escalation of commitment, (2) the mythical belief that the issues under negotiation are all fixed-pie, (3) the process of anchoring and adjustment in decision making, (4) issue and problem framing, (5) the availability of information, (6) the winner's curse, (7) negotiator overconfidence, (8) the law of small numbers, (9) self-serving biases, (10) the endowment effect, (11) the tendency to ignore others' cognitions, and (12) the process of reactive devaluation.

How have these distortions and biases affected negotiations that you have participated in or observed? Please provide examples for at least four types of bias or distortion.

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Hello. I provide the following to assist you.

Distortions and biases can affect almost any business and personal transaction. Distortions inhibit people from reacting appropriately and treating people fairly.

1. Self serving bias: This bias occurs quite frequently. This bias indicates that people attribute any success that they have solely based on efforts of their own. However, at the same time they deny any responsibility for any failures. An example of this would be if you were completing this assignment and got an excellent grade on it. You would base this grade on your hard efforts. However, if you completed another assignment, and received a bad grade, you would place the blame on the bad grade because of some other factor, such as the difficulty in understanding the assignment.
Source: http://changingminds.org/explanations/theories/self-serving_bias.htm

2. Endowment effect: This bias is based upon the ...

Solution Summary

This solution provides an explanation of how distortions and biases affect negotiations.

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Negotiation and Improving Decision Making

Re-enact and analyze a historical negotiation scenario

1. Part 1: Re-enact AOL/Time Warner Merger negotiation scenario through role play and imagined dialogue. The three parties are 1) AOL shareholders, 2) Time Warner shareholders, and 3) Consumer Union. First, do some background research on your party's motives and interests in the negotiation. Then create an imagined dialogue between the 3 negotiating parties. Think about each party's feelings, motives, and interests, and present them. Ask questions of each opponent. Hide information from each opponent if each party did so in real life. Propose and respond to settlements. It's ok if the dialogue isn't completely historically accurate. What matters most is that you present each party's known position and actions as fully and accurately as possible so that you have enough information to analyze during the second part of the project.

Example dialogue:

BASEBALL PLAYERS' UNION: The players have decided to strike because they aren't happy with their contracts.

STADIUM FOOD VENDORS: A strike might force the cancellation of the entire season! This could ruin my business!

FANS: You already earn extremely large salaries. What more could you want?

BASEBALL PLAYERS' UNION: Our terms are as follows: [terms X, Y, and Z]

TEAM OWNERS: Couldn't we finish this season and just keep negotiating?

BASEBALL COMMISSIONER: I propose the following: [settlement proposal X]

and so on.

2. Part 2 (Group): Analyze the negotiation scenario. Summarize and analyze the negotiation. In your analysis be sure to address the following 7 questions' answers:

1. Who were the parties?
2. What was the final outcome?
3. What were the alternatives to a negotiated agreement? Were the parties aware of these alternatives?
4. What were each party's set of interests? Were the parties aware of their interests?
5. How did the parties create or claim value?
6. Indicate whether any party made any of the following cognitive mistakes in the negotiation:
* Assuming a fixed-pie perspective
* Lack of awareness of framing effects
* Nonrational escalation of conflict
* Negotiator overconfidence
* Negotiator egocentrism
* Anchoring
* Ignoring the cognition of others
7. If cognitive mistakes were made, how did they affect the negotiation? How might the parties have acted differently?

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