{"id":45293,"date":"2021-08-07T17:58:00","date_gmt":"2021-08-07T21:58:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=45293"},"modified":"2021-08-16T12:40:38","modified_gmt":"2021-08-16T16:40:38","slug":"cognitive-bias-in-negotiation","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/cognitive-bias-in-negotiation\/","title":{"rendered":"Cognitive Bias in Negotiation: Use It Strategically"},"content":{"rendered":"\n

What role does cognitive bias<\/a> play in negotiation? What biases have the greatest impact on your and your counterpart’s decision-making<\/a>? <\/p>\n\n\n\n

In negotiation, cognitive bias plays a crucial role in how we receive information and determine our best interests. And as a skilled negotiator, you can take advantage of universal human cognitive biases<\/a> to frame your position in a way that makes it optimally attractive to your counterpart.<\/p>\n\n\n\n

In this article, we’ll discuss how to use two cognitive biases (the framing effect<\/a> and the loss aversion bias<\/a>) to steer a negotiation in your desired direction.<\/p>\n\n\n\n\n\n\n\n

Chris Voss on Cognitive Bias in Negotiation<\/h2>\n\n\n\n

In his book Never Split the Difference<\/em>, former FBI negotiator Chriss Voss writes that you need to figure out what your counterpart\u2019s true, underlying need is and then frame your<\/em> position <\/em>such that it satisfies that need. To do so, you can take advantage of their cognitive biases: mental errors<\/a> in routine information processing that impact how we react to situations and form judgments. <\/p>\n\n\n\n

Voss notes that advertisers understand this principle well. The products and services we purchase are usually presented to us as satisfying some deeper, more intrinsic need. When someone purchases a home-security system, they\u2019re not really <\/em>purchasing the sensor, door chimes, cameras, or home-automation technology. Instead, what they\u2019re really buying is the peace of mind that comes with believing that their home and family are safe. That\u2019s why advertisements for these products emphasize the emotional benefits of being able to enjoy normal life without having to think about your family being harmed or your possessions being stolen. <\/p>\n\n\n\n

Similarly, Voss notes that makers of luxury products like sports cars and jewelry don\u2019t emphasize the technical features of the vehicle or the gemological specifics of the diamond ring they\u2019re trying to sell. Instead, they highlight the exclusivity and rarity of these goods. They do this because they know that their customers are largely driven by the need to assert their status <\/em>through owning and displaying these products, which satisfies a deeper need to feel superior to others.<\/p>\n\n\n\n

(Shortform note: Economists call status symbol goods like jewelry, fine champagnes, or designer jewelry Veblen goods<\/em>\u2014named for the economist Thorstein Veblen, who famously explored the phenomenon of conspicuous consumption<\/a> among economic elites in 1899\u2019s The Theory of the Leisure Class<\/em><\/a>. Veblen goods differ from ordinary goods in that demand for them tends to increase <\/em>as their price increases<\/a>. As they become more expensive, fewer people can afford to buy them, which makes them rare. For people who wish to own such rare items to highlight their elite status, this rarity and exclusivity is precisely what makes them valuable.)<\/p>\n\n\n\n

The same principle applies to your negotiating position, argues Voss. How you frame <\/em>your position or offer <\/em>matters just as much\u2014if not more <\/em>than\u2014the actual substance of the position itself. <\/p>\n\n\n\n

Cognitive Bias #1: The Framing Effect<\/strong><\/h3>\n\n\n\n

The first cognitive bias in negotiation Voss points to is what\u2019s known as the framing effect. People respond differently to identical choices based solely on how they\u2019re presented.<\/strong> For example, the framing effect would make health-conscious consumers more likely to purchase milk when it\u2019s marketed as being \u201c99% fat-free\u201d versus \u201c1% fat\u201d, believing that the first option is less fatty (even though, of course, there\u2019s no difference between either product other than how the label positions them).<\/p>\n\n\n\n

(Shortform note: A variant on the framing effect is what\u2019s known as the valence-framing effect. Research has shown that people hold their negative opinions\u2014in other words, what they\u2019re against<\/em>\u2014much more strongly and confidently than their positive opinions\u2014what they\u2019re in favor <\/em>of. In other words, we seem to dislike what we dislike more than we like what we like<\/a>. In one social psychology experiment, participants who expressed a preference for fictional political candidate A over candidate B showed a notable division in how they responded to information that their preferred candidate had engaged in corruption. Those who supported candidate A because they were pro<\/em>-candidate A were more willing to abandon their support in light of this information; those who favored A because they were anti<\/em>-candidate B were far more likely to dismiss the corruption allegations and even double down on their support for A.)<\/p>\n\n\n\n

Cognitive Bias #2: Loss Aversion<\/strong><\/h3>\n\n\n\n

Closely related to the framing effect is the principle of loss aversion. Loss aversion makes people fear an equal loss more than they value an equal gain<\/strong>. Voss observes that salespeople are skillful manipulators of the loss aversion principle<\/a>. When they say things like, \u201cI just wanted to give you the opportunity to take advantage of this offer before it goes away, \u201d they\u2019re creating a (usually false) feeling of urgency that triggers your sense of loss aversion. When something is framed this way, you\u2019re no longer thinking of gaining something\u2014you\u2019re thinking about <\/strong>losing <\/em><\/strong>out on a potential deal.<\/strong> <\/p>\n\n\n\n

Knowing this, you can put yourself in a strong negotiating position by framing your preferred solution as one that <\/strong>prevents your counterpart from incurring a loss<\/em><\/strong>.<\/p>\n\n\n\n

For example, if you\u2019re making an offer on a house that needs some work, you might say something like, \u201cThe house is great but it definitely needs significant contracting work. There\u2019s foundational damage, and the gas line for the grill is too close to the house to pass inspection. I\u2019m willing to pay cash now and absorb those costs so <\/strong>you <\/em><\/strong>don\u2019t have to shell out that money<\/strong>. Plus, I\u2019m willing to waive inspection. But if we take too long and end up having to go through inspection, I might have to start looking for other deals.\u201d<\/strong><\/p>\n\n\n\n

Loss Aversion and the \u201cScarcity Principle\u201d<\/strong>

In Influence<\/em><\/a>, author Robert Cialdini argues that loss aversion is closely tied to an idea called the Scarcity Principle. The Scarcity Principle makes things with limited availability more appealing to us. Thus, rare goods are expensive and abundant items are cheap (like how gold is more valuable than iron). We\u2019re more compelled to buy these goods because we instinctively fear that we\u2019ll lose our opportunity if we don\u2019t act immediately. Cialdini notes that sales professionals are skilled in using this principle to their advantage. It\u2019s why we see so many \u201climited-time only\u201d or \u201cfirst-come, first-serve\u201d sales pitches: The goal is to drive you the buyer into a loss-aversion frenzy that forces you to suspend your better judgement and rush headlong into an ill-considered decision. Knowing this, you can use the principle to your advantage by making your counterpart feel your offer has an element of scarcity built in. <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

How to Frame What You Want<\/strong><\/h3>\n\n\n\n

With this new knowledge of cognitive biases, Voss presents specific negotiating tactics to make your counterpart think about your position in the way you want them to.<\/p>\n\n\n\n

Anchor their emotions by anticipating their accusations <\/strong>so <\/strong>that you acknowledge all of their fears. By preparing them for a loss, you\u2019ll trigger their loss aversion and make them work hard just to avoid it. This also helps frame your offer as being better<\/em> than worse alternatives. Even something as seemingly innocuous as prefacing a criticism with \u201cYou might hate me for saying this, but\u2026\u201d can achieve this. You\u2019re priming<\/a> them for an unpleasant experience. And in order to avoid <\/em>that experience, they\u2019ll start convincing themselves that what you\u2019re telling them isn\u2019t actually that bad\u2014in other words, they\u2019re already doing the mental work to avoid a \u201closs.\u201d <\/p>\n\n\n\n