Negotiation Psychology & Cognitive Biases Flashcards

The anchoring bias in negotiation refers to which of the following phenomena?

Answer: Negotiators rely too heavily on the first piece of information offered when making decisions

Anchoring bias occurs when the first number or piece of information presented disproportionately influences subsequent judgments and offers.

Which cognitive bias causes negotiators to unconsciously discard information that contradicts their existing beliefs about a deal?

Answer: Confirmation bias

Confirmation bias leads negotiators to seek out and give extra weight to information that supports their pre-existing positions while ignoring contradictory evidence.

Loss aversion theory, as applied to negotiation, suggests that people weigh potential losses relative to equivalent gains in which ratio?

Answer: 2:1 — losses feel roughly twice as impactful as equivalent gains

Kahneman and Tversky's prospect theory shows losses are psychologically about twice as powerful as equivalent gains, making people risk-averse when framed around losses.

A negotiator who continues pursuing a deal primarily because of the time and resources already invested, even when the deal no longer makes economic sense, is exhibiting which bias?

Answer: Sunk cost fallacy

The sunk cost fallacy causes negotiators to irrationally factor in past, unrecoverable investments rather than evaluating the deal purely on future costs and benefits.

Reactive devaluation in negotiation occurs when a negotiator:

Answer: Automatically assigns less value to a proposal simply because the opposing party offered it

Reactive devaluation is the tendency to discount or dismiss a proposal solely because it originated from an adversarial or opposing party.

Overconfidence bias in negotiation most commonly manifests as which of the following?

Answer: Negotiators overestimating the probability that an agreement will be reached on their preferred terms

Overconfidence bias leads negotiators to have inflated assessments of their own positions, skills, and the likelihood of achieving their desired outcomes.

Which of the following best illustrates how the framing effect influences negotiation outcomes?

Answer: Presenting an offer as a loss avoidance tends to be more persuasive than framing it as a gain

Because of loss aversion, framing an offer in terms of what the other party will lose by not accepting tends to be more persuasive than framing the same outcome as a gain.