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Blinded by Power: Untangling Mixed Results Regarding Power and Efficiency in Negotiation

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Abstract

Negotiators are often advised to seek information about their counterparts’ power. However, we know little about how such information affects negotiators’ behaviours and outcomes. Study 1 considered dyadic negotiations in which negotiators have symmetric or asymmetric best alternatives to the negotiated agreement (BATNAs). It also examined the impacts of (a)symmetry and knowledge of a counterpart’s BATNA on agreement efficiency (indexed by joint gains), and how knowledge alters negotiators’ realised power (indexed by percentage of resource claimed) in BATNA-asymmetric negotiations. Studies 2 and 3 focussed on BATNA-asymmetric negotiations. Study 2 tested the mechanism by which knowledge affects efficiency. Study 3 considered the impacts of knowledge on equity concerns, perceived power and information exchange about preferences. The findings indicate the following: knowledge of BATNA asymmetries (rather than the existence of BATNA asymmetries) adversely affects agreement efficiency; this knowledge increases strong negotiators’ focus on value claiming, judgement errors about counterparts’ preferences, perceived power and realised power, but impedes their information-sharing behaviour about preferences. Their focus on value claiming mediates the relationship between knowledge and judgement errors, whereas judgement errors mediate the relationship between their focus on value claiming and agreement efficiency. Furthermore, knowledge of BATNA asymmetries leads to contrasting perceptions of fairness. Strong negotiators with knowledge believe that a fair agreement should reflect their power advantage; weak negotiators generally tend to judge fairness based on equality. Counterintuitively, knowing one’s own strengths can lead to ‘winning’ a meagre prize and neglecting the opportunity for value creation by trading-off on negotiated issues.

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Notes

  1. In Pinkley’s (1995) study, when negotiators only knew their own BATNAs, the impact of BATNA asymmetries on agreement efficiency disappeared.

  2. Note that the definition of power in these studies differs from ours. For example, power was represented in some studies by the number of alternatives that negotiators have; in others, the difference in power was manipulated by varying the probabilities of various profits of the alternatives.

  3. It is important to note that we are not suggesting that only informed strong negotiators suffer from fixed-pie bias. Instead, it is speculated that informed strong negotiators are more likely to suffer from this bias than those who lack knowledge of BATNA asymmetries.

  4. Mannix and Neale (1993) conjectured that weak negotiators might be forced to think creatively and come up with alternative solutions. As more recent studies have shown that power symmetries, rather than power asymmetries, facilitate value creation (Giebels et al. 2000; Wolfe and Mcginn 2005), we do not expect that knowledge of power asymmetries increases a negotiator’s ability to create value.

  5. The conditions Both Strong & Knowledge and Both Weak & Knowledge were added to the original design of Study 1. Hence, the assignment was not fully randomised.

  6. Pinkley (1995) considered the potential effect of role in job contract negotiations but was not found to have a significant impact on pre-negotiation parameters (i.e., reservation price, aspiration levels) and negotiated outcomes.

  7. A complete analysis of accuracy in negotiation would also entail assessing negotiators’ perceptions of the distributive issue (e.g., salary, see “Appendix”). This is not done in the present study because previous analyses indicate little or no variance on this measure (Thompson 1990a, b).

  8. In the case that disagreements occurred, the code assigned by the first rater was retained to be consistent with the larger data set. The inter-rater reliability is reported in Sect. 4.2.1.

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Acknowledgments

This project is partially supported by Hang Seng Management College Research Fund.

Author information

Authors and Affiliations

  1. Department of Supply Chain and Information Management, Hang Seng Management College, Room D604-B1, Hang Shin Link, Siu Lek Yuen, Shatin, N.T., Hong Kong

    Ricky S. Wong

  2. The London School of Economics and Political Science, London, WC2A 2AE, UK

    Susan Howard

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  1. Ricky S. Wong
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Corresponding author

Correspondence to Ricky S. Wong.

Appendix

Appendix

Pay-off schedules for job negotiation task

Salary

Annual leave

Bonus

Starting date

Medical coverage

Company car

Employer pay-off schedule

£24,000

25 days

10 %

1st July

Plan A

BMW 330i

(0)

(0)

(0)

(1200)

(3200)

(0)

£23,000

20 days

8 %

15th July

Plan B

VW Golf

(500)

(1000)

(400)

(900)

(2400)

(200)

£22,000

15 days

6 %

1st Aug

Plan C

Honda

(1000)

(2000)

(800)

(600)

(1600)

(400)

£21,000

10 days

4 %

15th Aug

Plan D

Ford Focus

(1500)

(3000)

(1200)

(300)

(800)

(600)

£20,000

5 days

2 %

1st Sept

Plan E

No company car

(2000)

(4000)

(1600)

(0)

(0)

(800)

Employee pay-off schedule

£24,000

25 days

10 %

1st July

Plan A

BMW 330i

(2000)

(1600)

(4000)

(1200)

(0)

(3200)

£23,000

20 days

8 %

15th July

Plan B

VW Golf

(1500)

(1200)

(3000)

(900)

(200)

(2400)

£22,000

15 days

6

1st Aug

Plan C

Honda

(1000)

(800)

(2000)

(600)

(400)

(1600)

£21,000

10 days

4 %

15th Aug

Plan D

Ford Focus

(500)

(400)

(1000)

(300)

(600)

(800)

£20,000

5 days

2 %

1st Sept

Plan E

No company car

(0)

(0)

(0)

(0)

(800)

(0)

  1. The possible number of points that negotiators could receive are shown in parentheses

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Wong, R.S., Howard, S. Blinded by Power: Untangling Mixed Results Regarding Power and Efficiency in Negotiation. Group Decis Negot 26, 215–245 (2017). https://doi.org/10.1007/s10726-016-9495-5

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