CPN Negotiation Psychology & Cognitive Biases 1 — Questions and Answers
Question 1: The anchoring bias in negotiation refers to which of the following phenomena?
- Negotiators rely too heavily on the first piece of information offered when making decisions (Correct answer)
- Negotiators prefer to anchor agreements in writing rather than verbally
- Negotiators favor deals that anchor benefits to future performance milestones
- Negotiators anchor their BATNA to the other party's reservation price
Correct 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.
Question 2: Which cognitive bias causes negotiators to unconsciously discard information that contradicts their existing beliefs about a deal?
- Availability heuristic
- Confirmation bias (Correct answer)
- Reactive devaluation
- Overconfidence bias
Correct 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.
Question 3: Loss aversion theory, as applied to negotiation, suggests that people weigh potential losses relative to equivalent gains in which ratio?
- 1:1 — losses and gains are weighted equally
- 2:1 — losses feel roughly twice as impactful as equivalent gains (Correct answer)
- 5:1 — losses feel five times more painful than equivalent gains
- 0.5:1 — people are more motivated by gains than losses
Correct 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.
Question 4: 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?
- Reactive devaluation
- Status quo bias
- Sunk cost fallacy (Correct answer)
- Escalation of commitment
Correct 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.
Question 5: Reactive devaluation in negotiation occurs when a negotiator:
- Overvalues a concession because it came with a high initial price
- Automatically assigns less value to a proposal simply because the opposing party offered it (Correct answer)
- Reacts emotionally to an aggressive tactic and walks away from the table
- Devalues their own BATNA after comparing it to the other side's offer
Correct 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.
Question 6: Overconfidence bias in negotiation most commonly manifests as which of the following?
- Negotiators underestimating their own BATNA strength
- Negotiators setting overly modest targets to avoid disappointment
- Negotiators overestimating the probability that an agreement will be reached on their preferred terms (Correct answer)
- Negotiators deferring decisions to third parties to reduce personal risk
Correct 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.
Question 7: Which of the following best illustrates how the framing effect influences negotiation outcomes?
- Presenting the same economic offer as a gain leads to more acceptance than presenting it as avoiding a loss
- Negotiators who frame issues broadly tend to reach agreements faster
- Presenting an offer as a loss avoidance tends to be more persuasive than framing it as a gain (Correct answer)
- The framing effect only applies to written negotiations, not verbal ones
Correct 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.
CPN Negotiation Psychology & Cognitive Biases 1
The anchoring bias in negotiation refers to which of the following phenomena?