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Amit Patel

Getting the Deal Done: Cognitive Science in Negotiation

May 5th, 2020
Amit Patel, JD, MA
Amit Patel, Jury Consultant
Themevision Focus

Whether buying a car, haggling with a child over bedtime, or trying to lock down a big business deal, negotiation is a certainty in our lives, and for many of us, essential to our work. With so many driving factors, any appreciable edge can prove crucial to success. Where can we look to find that edge? Cognitive science studies provide guidance on how we can seal the deal. Here are a couple of tips informed by psychology to help you negotiate more effectively.

Utilize Loss Aversion

Do we weigh information about potential gains and losses equivalently? Research suggests that information framed as a loss will be more influential than information framed as a gain. We fear losses more than we desire gains, and are more motivated to avoid losses, even when the gains and losses are of equivalent magnitude. “Loss aversion” studies have demonstrated that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.

Consider the following example in which a power company representative provided free energy audits to homeowners. After the audit, the representative offered products and services that could help the homeowner lower their energy costs. Half the homeowners were told: “If you insulate your home, you will save X cents per day.” The other half were told: “If you fail to insulate your home, you will lose X cents per day.” Even though the information was identical, those who were told how much they stood to lose by not complying with the recommendation were significantly more likely to purchase the insulation.

Takeaway: Negotiators can be more influential and gain more support for their proposals if their pitch is framed in terms of what the counterpart stands to lose by declining. For example, instead of telling your counterpart that your offer will provide them “X, Y, and Z,” reframe it as them missing the opportunity to obtain X, Y, and Z if they decline your offer, or that a competitor’s proposal will not provide them with X, Y, and Z.

Disaggregate Gains & Aggregate Losses

Individuals were presented with the following scenarios, and asked which would make them happier:

Scenario A:  You are walking down the street and find a $20 bill.

Scenario B:  You are walking down the street and find a $10 bill. The next day, as you are walking on a different street, you find another $10 bill.

They were also asked which of the following would make them unhappier:

Scenario X:  You open your wallet and discover you have lost a $20 bill.

Scenario Y:  You open your wallet and discover you have lost a $10 bill. The following day you lose another $10 bill.

Across the scenarios, the gain or loss is the same. Yet, the majority of people indicated they would be happier in Scenario B, and unhappier in Scenario Y.

Takeaway: Maximize your counterpart’s happiness, and by extension their willingness to accept a deal, by breaking your overall concession into smaller concessions. For example, if you are offering an additional $10k, portion that total into smaller amounts rather than providing the $10k up front and at once. This strategy can also be used when relaying good news.

For example, “The project will be fully completed under budget and ahead of schedule” can be separated into smaller pieces, as follows:

  • The project will meet or exceed all quality requirements.
  • The project will be completed under budget.
  • The project will be completed ahead of schedule – no later than June 1.

Now you’ve seemingly tripled the benefits, and your counterpart will perceive greater value in the deal. Maximize the effect by parsing out the benefits over time. In the opposite scenario, where you’re asking for concessions, imposing penalties, or delivering bad news, don’t break it up. Instead, aggregate them to minimize the negative impact.

In high stakes negotiations, moving the needle even a little in your favor can result in a large gain. By utilizing the tactics presented here, you can add to your negotiation toolbox and become a more effective negotiator who ultimately gets the deal done!

Kolenda, N. (2020, May 4). Negotiation tactics. Nick Kolenda psychology & marketing. https://www.nickkolenda.com/negotiation-tactics/

Malhotra, D., & Bazerman, M. H. (2008). Psychological influence in negotiation: An introduction long overdue. Journal of Management, 34(3), 509–531. https://doi.org/10.1177/014920630831606