MGMT2004 Negotiation (Australian National University) PDF

Topic six Perception, Cognition and Emotion in Negotiation MGMT2004 Negotiation Lecturer: Dr. Chirag Kasbekar Research School of Management College of Business and Economics ...

Topic six Perception, Cognition and Emotion in Negotiation MGMT2004 Negotiation Lecturer: Dr. Chirag Kasbekar Research School of Management College of Business and Economics  2 Agenda for today >>> LIMITS TO PERCEPTION IN COGNITION IN MOOD, RATIONALITY NEGOTIATION NEGOTIATION EMOTION IN NEGOTIATION EXERCISE: THE INTERNSHIP Limits to rationality: Perception, Cognition and Emotion + 4 Rationality in Negotiations Rationality: making a decision that maximizes the negotiator’s interest. Bounded rationality (Herbert cognitive limitations, Simon, 1957): People make lack of information, imperfect decisions (i.e., satisficing inadequate time vs. maximizing) due to: Important to understand the psychological forces that limit a negotiator’s effectiveness. + 5 Perception, Cognition, and Emotion in Negotiation The basic building blocks of all social encounters are: Perception Framing Cognition Cognitive biases Emotion Perception in negotiation  7 Perception >>> THE PROCESS BY WHICH PROCESS OF GATHERING A “SENSE-MAKING” INDIVIDUALS CONNECT TO INFORMATION AND PROCESS THEIR ENVIRONMENT ASCRIBING MEANING TO IT The Process of Perception >>> The process is strongly influenced by the perceiver’s current state of mind, role, and comprehension of earlier communications People interpret their environment in order to respond appropriately The complexity of environments makes it impossible to process all of the information People develop heuristics or “shortcuts” to process information and these “shortcuts” can create perceptual errors Perception distortion >>> + 10 Perceptual distortion in a social context Four major perceptual errors: Stereotyping Halo effects Selective Projection perception  11 Stereotyping and Halo Effects >>> Very common Individual assigns attributes to another solely on Stereotyping: the basis of the other’s membership in a particular social or demographic category Are similar to stereotypes Occurs when an individual generalizes about a Halo effects: variety of attributes based on the knowledge of one attribute of an individual  12 Comparing Cultures as Overlapping Normal Distributions Variation across and within cultures >>> People differ not only across cultures, but also within cultures  13 Stereotyping from the Cultural Extremes Variation across and within cultures >>> Stereotypes often focus on the extremes and ignore similarities  14 Selective Perception and Projection >>> The perceiver singles out information that Selective supports a prior belief but filters out perception: contrary information Perpetuates stereotypes or halo effects People assign to others the characteristics or feelings that they possess themselves Projection: Arises out of a need to protect one’s own self-concept Framing Frames: >>> – Represent the subjective mechanism through which people evaluate and make sense of situations – Define a person, event or process – Impart meaning and significance – Lead people to pursue or avoid subsequent actions  >>> Global Epidemic Problem Adapted from Kahneman & Tversky, 1981) Scenario 1: >>> Imagine that Australia is preparing for an outbreak of an unusual disease, which is expected to kill 600 individuals. Adapted from Kahneman & Tversky, 1981) Two options: >>> 1. If Program A is adopted, 200 people will be saved. 2. If Program B is adopted, there is a one-third probability that 600 people will be saved and a two-third probability that no people will be saved. Adapted from Kahneman & Tversky, 1981) Scenario 2: >>> Imagine that Australia is preparing for an outbreak of an unusual disease, which is expected to kill 600 individuals. Adapted from Kahneman & Tversky, 1981) Two options: >>> › If Program C is adopted, 400 people will die. › If Program D is adopted, there is a one-third probability that no one will die and a two-third probability that 600 people will die. Which one would you choose? Adapted from Kahneman & Tversky, 1981) A scenario study. >>> Imagine that the U.S. is preparing for an outbreak of an unusual Asian disease, which is expected to kill 600 individuals. Manipulations: Risk (low risk option = Program A; risky option = Program B) and decision frame (gain vs. loss) Gain-frame condition: A: 72% › If Program A is adopted, 200 people will be saved. › If Program B is adopted, there is a one-third probability that 600 people will be saved and a two-third probability that no people will be saved. Loss-frame condition: › If Program A is adopted, 400 people will die. › If Program B is adopted, there is a one-third probability that no one will die and a two-third probability that 600 people will die. B: 78% Prospect Theory (Kahneman & Tversky, 1979) Explains framing effects. >>> People value a certain gain more than a probable gain with an equal or greater expected value; the opposite is true for losses. Gains and losses are evaluated from a subjective reference point. The function relating the subjective value and the corresponding losses is steeper than that for gains. As a result, the displeasure associated with the loss is greater than the pleasure associated with the same amount of gains. Therefore, people respond differently, depending on whether the choices are framed in terms of gains or in terms of losses. Types of Frames Substantive (focus on key issues) >>> Outcome (the main predisposition is toward achieving a particular outcome) Aspiration (the main predisposition is toward achieving a broader set of interests) Process (more concerned about procedural issues rather than distributive issues) Identity (how the parties define who they are) Characterization (how the parties define the other party) Loss-Gain How Frames Work in Negotiation Negotiators can use more than one frame >>> Mismatches in frames between parties are sources of conflict Parties negotiate differently depending on the frame Specific frames may be likely to be used with certain types of issues Particular types of frames may lead to particular types of agreements Parties are likely to assume a particular frame because of various factors The frame of an issue changes as the negotiation evolves Interests, Rights, and Power Parties in conflict use one of three frames: >>> Interests: people talk about their“positions" but often what is at stake is their underlying interests Rights: people may be concerned about who is“right” – that is, who has legitimacy, who is correct, and what is fair Power: people may wish to resolve a conflict on the basis of who is stronger Cognitive biases in negotiation Cognitive Biases in Negotiation >>> Negotiators have a tendency to make systematic errors when they process information. These errors, collectively labeled cognitive biases, tend to impede negotiator performance. + Cognitive Biases Irrational escalation of The winner’s curse commitment Overconfidence Mythical fixed-pie beliefs The law of small numbers Anchoring and adjustment Self-serving biases Issue framing and risk Endowment effect Availability of information Ignoring others’ cognitions Reactive devaluation  29 Irrational Escalation of Commitment and Mythical Fixed-Pie Beliefs >>> Irrational escalation of Mythical fixed-pie beliefs commitment Negotiators maintain commitment to a Negotiators assume that all negotiations course of action even when that (not just some) involve a fixed pie commitment constitutes irrational behavior + 30 Anchoring and Adjustment and Issue Framing and Risk The effect of the standard (anchor) against which subsequent Anchoring and adjustments (gains or losses) are measured adjustment The anchor might be based on faulty or incomplete information, thus be misleading Issue framing and Frames can lead people to seek, avoid, or be neutral about risk in risk decision making and negotiation  31 Availability of Information and the Winner’s Curse >>> Operates when information that is Availability of presented in vivid or attention-getting ways becomes easy to recall information Becomes central and critical in evaluating events and options The tendency to settle quickly on an The winner’s curse item and then subsequently feel discomfort about a win that comes too easily + 32 Overconfidence and the Law of Small Numbers The law of small Overconfidence numbers The tendency of The smaller sample, the negotiators to believe The tendency of greater the possibility that their ability to be people to draw that past lessons will be correct or accurate is conclusions from small erroneously used to greater than is actually sample sizes infer what will happen true in the future + Self-Serving Biases 33 and Endowment Effect People often explain another person’s behavior by making attributions, either to the person or to the situation Self-serving biases There is a tendency to: Overestimate the role of personal or internal factors Underestimate the role of situational or external factors Endowment effect The tendency to overvalue something you own or believe you possess + Ignoring Others’ Cognitions 34 and Reactive Devaluation Negotiators don’t bother to ask about Ignoring others’ the other party’s perceptions and thoughts cognitions This leaves them to work with incomplete information, and thus produces faulty results Reactive devaluation The process of devaluing the other party’s concessions simply because the other party made them + Managing Misperceptions and Cognitive 35 Biases in Negotiation Discuss them in a The best advice Be aware of the structured manner that negotiators negative aspects of within the team can follow is: these biases and with counterparts Mood and emotion in negotiation Mood, Emotion in Negotiation >>> The distinction between mood and emotion is based on three characteristics: n Specificity n Intensity n Duration + 38 Mood, Emotion in Negotiation Negotiations create both positive and Positive emotions generally have negative emotions positive consequences for negotiations They are more likely to lead the parties toward more integrative processes They create a positive attitude toward the other side They promote persistence Mood, Emotion, and Negotiation Aspects of the negotiation process can lead to >>> positive emotions n Positive feelings result from fair procedures during negotiation n Positive feelings result from favorable social comparison Mood, Emotion, and Negotiation Negative emotions generally have negative consequences for >>> negotiations – They may lead parties to define the situation as competitive or distributive – They may undermine a negotiator’s ability to analyze the situation accurately, which adversely affects individual outcomes – They may lead parties to escalate the conflict – They may lead parties to retaliate and may thwart integrative outcomes – Not all negative emotion has the same effect + 41 Mood, Emotion, and Negotiation Aspects of the negotiation Effects of positive and Emotions can be used process can lead to negative emotion strategically as negative emotions negotiation gambits. Negative emotions may result from Positive feelings may generate a competitive mind-set negative outcomes Negative emotions may result from Negative feelings may elicit an impasse beneficial outcomes Negative emotions may result from the prospect of beginning a negotiation