DECISION MAKING
Consider again, briefly, our simple PSDM model (Figure 9.1). We suggested that decision making is going on both during and after the problem-solving process. At both of those points, there are decisions that each party makes individually and decisions made by the parties together.
In the following discussion, we look first at the individual as decision maker and then at group decision making.First, a broad summary. Many of the theorists whose work is mentioned here define the negotiation process itself in decision-making terms (for example, Bazerman and Neale, 1986; Kahneman, 1992; Zey, 1992). Some taking this view conceptualize each party as a decision maker (for example, Kahneman, 1992; Mann, 1992), while others focus on the conflict resolution process as one of joint decision making (for example, Bennett, Tait, and Macdonagh, 1994; Brett, 1991). It is possible, on the one hand, to think of the negotiator as someone with a series of decisions to make in the course of a negotiation, ultimately leading to the decision of whether to agree to a particular solution. On the other hand, one can also think about the process of negotiation as one of joint decision making, in which two or more parties with differing interests must jointly reach a decision—the resolution they ultimately agree to. In fact, many clients, when engaging a third-party mediator, describe their conflicts precisely as decision-making problems in which people are having a hard time making a decision together.
The Individual as Decision Maker
The emphasis here is on the problem of choice among alternatives, be they alternative agreements or alternative actions to take along the way. Many theories of decision making emphasize the notion of rational choice and are built on the notion of expected utility. The expected-utility principle has been traced as far back as the eighteenth-century theorist Bernoulli (Abelson and Levi, 1985).
The idea is that risky decisions involve choices in which we cannot be certain of what will happen as a result of our choice (as when a negotiator decides to hold out for a larger concession). For each option, we have to consider (1) the likelihood (expectation) that making this choice will get us what we hope it will and (2) the value, or utility, we attach to that outcome. Assuming that both the probability and the utility can be expressed as numbers, the expected utility for each option, then, is the product of probability and the associated utility. Thus “the expected-utility principle says that preferences between options accord with their relative expected utilities” (Abelson and Levi, 1985, p. 244). In conflict resolution, this principle would imply that people’s preferences among outcomes, possible settlements, or offers will be determined rationally according to the expected-utility principle.Various limits to this approach have been discovered, however, and they have led to a number of useful ideas. Here we briefly summarize a few of the key findings and theories.
Anchors, Frames, and Reference Points. It turns out that anchors, frames, and reference points can influence decision-making processes in such ways that people do not make the kinds of choices that the “rational” decision-making model predicts. The description here follows Kahneman (1992), whose excellent review is recommended to those interested in pursuing these ideas in detail.
The reference point in a negotiation is the point above which the party considers an outcome to be a gain and below which any outcome is considered a loss. In a given negotiation, several reference points might be available to a party: the status quo, the party’s opening offer, the other side’s initial offer, a settlement reached in a comparable case, and so on. Depending on which reference point a party has in mind, a given outcome might be seen (or framed) as a gain or a loss. The central finding here is that people tend to be loss-averse: avoiding loss is more important than achieving gain, and “concessions that increase one’s losses are much more painful than concessions that forgo gains” (Kahneman, 1992, p.
298). As a result, when faced with a possible loss, people become more willing to take risks rather than accept a large loss. For example, one may be inclined to risk impasse, rather than make an offer accepting a large loss. By contrast, if there is a possibility of gain, people tend to be less willing to take a risk (perhaps of impasse) in the hope of yet larger gains. If a decision is framed negatively (as one between losses), then people tend to be more risk- prone than if it is framed positively (as one between gains). There is an important exception to this effect: if the goods being lost or gained are desirable only, or mainly, to be used in exchange (money kept for spending, goods kept for trading), then giving them up may not be viewed as a loss, and concessions may not be as painful (Kahneman, 1992).Anchors are salient values that influence our thinking about possible outcomes, much like reference points. The difference is that whereas reference points define the neutral point between gains and losses, anchors may be anywhere along the scale and are often at the extremes. One of the most striking of anchoring effects is that negotiators are often unduly influenced by an anchor that they clearly know to be irrelevant—such as an outrageously low offer. Kahneman defines anchoring effects as “cases in which a stimulus or message that is clearly designated as irrelevant and uninformative nevertheless increases the [perceived] normality of a possible outcome” (1992, p. 308). There are a great many subtleties to the effects of anchors. The critical point for conflict resolution is recognizing their existence and developing methods for coping with their influence.
Impact of Stress. Conflict often produces psychological states, such as stress, and affective (emotional) reactions that include anxiety, anger, and elation (Mann, 1992), thus introducing another set of barriers to “rational” decision making. From the perspective of Janis and Mann’s conflict theory of decision making (1977), there are important linkages among stress, conflict, and coping patterns (Janis, 1993; Mann, 1992); according to Mann, “the model is founded on the assumption that decisional conflict is a source of psychological stress.
The task of making a vital decision is worrisome and can cause anxiety reactions such as agitation, quick temper, sleeplessness or oversleeping, loss of appetite or compulsive overeating, and other psychosomatic symptoms” (p. 209).From this perspective come a number of interesting findings. Cognitive functioning in decision making declines under stress; time pressure increases stress and thus negatively affects decision making, as well as reduces the willingness to take risks; and mood has predictable effects on risk taking: when in a good mood (compared to a neutral mood), people are more risk seeking when the risk is low but less risk seeking when risk is high. This pattern appears to reflect the fact that in a good mood, people think more about loss under high-risk situations, but they think less about loss when risk is low (Mann, 1992).
Another View of Risk. In the previous sections, we discussed some of the impact of framing, stress, emotion, and mood on risk taking. Taking a slightly different view, Hollenbeck and his colleagues have argued that much of the research on risky decision making is limited in that it uses decisions that are static: they involve a one-shot decision with no future implications, no effect of past performance, and a high degree of specificity about outcomes and probabilities (Hollenbeck, Ilgen, Phillips, and Hedlund, 1994). By contrast, most decisions in conflict situations do not meet these conditions. Hollenbeck and colleagues conducted an experiment in which they varied these conditions and found that giving a general do-your-best goal instead of a specific goal actually reversed the framing effect described by Kahneman and Tversky (1984). Hollenbeck and colleagues conclude that to better understand the conditions that lead to risk taking, we need to know more about dynamic contexts, and we cannot freely generalize findings from static settings.
An Applied Approach. Approaches such as that of Janis and Mann (1977) are close in flavor to problem-solving approaches in being analytical and depersonalizing the conflict.
In this approach, a decision maker fills out a “decisional balance sheet,” listing all outcomes, weighting and summing costs and benefits, and thus analyzing the relative costs and benefits of each choice in order to make a decision. If the parties are willing to undertake the process together, they may be able to arrive at a decision they can agree to accept. But this approach makes some serious errors (as do others like it). In particular, it assumes that preferences on all issues can be translated into a common currency. This may be workable in some circumstances, as in a divorce mediation, for weighing relative preferences for the pots and pans on the one hand and a painting on the other. But it may be much less workable for weighing relative preferences for the house on the one hand and custody of the children on the other, since the house and the children do not readily convert into a common currency.Group Decision Making and Commitment
Viewing negotiation as joint decision making opens up the possibility of exploring such decisional biases as overconfidence and lack of perspective taking— processes about which there is knowledge in the decision-making domain—that may alter performance and dispute resolution behavior (Bazerman and Neale, 1986).
Behavioral Decision Making. One prominent, and particularly helpful, approach to understanding group decision making is known as behavioral decision making (BDM). BDM emphasizes rational negotiation, with the goal of making decisions that maximize one’s interests (Bazerman and Neale, 1992). Bazerman, Neale, and their colleagues have conducted an extensive program of research based on this approach (Bazerman and Neale, 1986; Loewenstein, Thompson, and Bazerman, 1989; Mannix and Neale, 1993; Neale and Bazerman, 1992; Thompson and Loewenstein, 1992; Valley, White, Neale, and Bazerman, 1992). Their findings are informative in terms of understanding conflict and working to resolve it. From a behavioral decision theory perspective, negotiation is seen as “a multiparty decision making activity where the individual cognitions of each party and the interactive dynamics of multiple parties are critical elements” (Neale and Bazerman, 1992, p.
157). The approach aims at being both descriptive and prescriptive, and it works with such concepts as the perceptions of the negotiators, their biases, and their aspirations.Bazerman and Neale (1992) offer a list of seven pervasive decision-making biases that interfere with the goal of negotiating rationally to maximize one’s interests. The first is “irrationally escalating your commitment to an initial course of action, even when it is no longer the most beneficial choice” (p. 2). Possible causes of this bias include the competitive irrationality that can ensue when winning becomes more important than the original goal, and also the biases in perception and judgment resulting from our tendency to seek information that confirms what we are doing and avoid information that challenges us.
The second bias is “assuming your gain must come at the expense of the other party, and missing opportunities for tradeoffs that benefit both sides” (Bazerman and Neale, 1992, p. 2). Earlier, we discussed some of the benefits of approaching mixed-motive conflict as potentially integrative rather than purely distributive. Bazerman and Neale argue that “parties in a negotiation often don’t find these beneficial trade-offs because each assumes its interests directly conflict with those of the other party” (p. 16). They call this mind-set the mythical fixed pie.
The third bias is “anchoring your judgments upon irrelevant information, such as an initial offer” (Bazerman and Neale, 1992, p. 2). For more on anchoring, see our earlier discussion in Anchors, Frames, and Reference Points.
The fourth is “being overly affected by the way information is presented to you” (Bazerman and Neale, 1992, p. 2). This refers to the effect of framing, discussed earlier. Bazerman and Neale suggest that a mediator who wants to encourage parties to compromise should work to help the parties see the conflict in a positive frame, one emphasizing gains rather than losses.
The fifth bias, “relying too much on readily available information, while ignoring more relevant data” (Bazerman and Neale, 1992, p. 2), has obvious implications for the quality of decisions. Bazerman and Neale urge negotiators to work to counteract this bias. Similarly, we urge mediators to be on the lookout for this tendency, both in disputants and in themselves.
The sixth bias, “failing to consider what you can learn by focusing on the other side’s perspective” (Bazerman and Neale, 1992, p. 2), takes a somewhat different slant on perspective taking from those presented earlier. In their version, emphasis is on gaining information about the other side’s motives by paying attention to their actions and taking their perspective into account.
The final bias, “being overconfident about attaining outcomes that favor you” (Bazerman and Neale, 1992, p. 2), is a particularly important one. Through anchoring on one’s own initial proposal, failing to learn from considering the other side’s perspective, distorting one’s perceptions of the conflict situation in order to feel better about oneself, and focusing too strongly on information that supports one’s position and ignoring information that challenges it, parties to a dispute often become overconfident in their ability to win; as a result, they miss out on opportunities to create integrative solutions. Thus, mediators in court- connected mediation programs may be faced with two parties, each absolutely certain that if they fail to settle the dispute, the judge or jury will find in their favor.
Let us now briefly discuss a number of other findings from the work of Bazerman, Neale, and their colleagues.
Power Imbalance. In an experimental study of the effects of power imbalance and level of aspiration, Mannix and Neale (1993) found that in a negotiation with integrative potential, (1) higher joint gains were achieved when power was equal than when unequal; (2) higher joint gains were achieved when aspirations were high rather than low; and (3) when power was unequal, higher joint-gain solutions tended to be driven by the offers of the low-power party. That is, in unequal power situations the high-power party was less likely to initiate a jointgain solution. As a result, the onus of generating and selling a joint-gain solution appeared to fall on the low-power party.
Interpretations of Fairness. Thompson and Loewenstein (1992) found a tendency among negotiators, in a simulation of a collective bargaining process, to make “egocentric interpretations of fairness.” That is, participants tended to assess fairness with a bias toward their own interests. This led to discrepancies between what each party saw as fair, each side tending to an interpretation benefiting themselves. Further, “the more people disagreed in terms of their perception of a fair settlement wage, the longer it took them to reach a settlement” (p. 184). Perhaps more surprisingly, providing the subjects with more background information, which might be expected to reduce bias, served only to exacerbate the self-serving nature of fairness assessments. (For more on biases, see Chapter Eleven.)
Preferences in Different Types of Relationships. Finally, in a study that bears directly on our earlier discussion of problem solving, Loewenstein, Thompson, and Bazerman (1989) found that people’s preferences for doing better than the other in disputes depended strongly on the nature of the relationship between the parties. The researchers manipulated two aspects of the dispute relationship: whether it was a business or personal dispute and whether the relationship between the parties was positive, negative, or neutral. They found that although parties (across combinations of dispute type and relationship) did not like outcomes in which they did more poorly than the other, there were substantial differences in how much parties preferred an outcome in which they did better than the other. First, in a negative relationship disputants tended to like doing better than the other, while in a positive or neutral relationship disputants tended to dislike doing better than the other (up to a certain high amount of gain, after which their preferences begin to rise again). Similarly, in business disputes, participants liked doing better than the other, but in personal disputes they disliked doing better than the other (again, up to a point). Significantly, these two tendencies reinforced each other; in business disputes, the preference for doing better was substantially enhanced in a negative relationship.
This study may have profound implications for the problem-solving approaches we have discussed. In particular, it tells us that in certain situations (such as a business dispute or negative relationship) people may be highly motivated to create a large difference between what they and their negotiating partners receive. Such motivation runs directly counter to the goal of the cooperative problemsolving approaches: to engage parties in maximizing mutual gain.