The surprising power of lost alternatives
New research illuminates the surprising power that even lost alternatives can have in future negotiations
'Tis better to have loved and lost than never to have loved at all.
— Alfred, Lord Tennyson
One of the most studied issues in business research is negotiation strategy. Researchers have examined this issue descriptively—seeking to understand how negotiations develop—and prescriptively—seeking to define the optimal approaches for various negotiations types and scenarios. One important issue within negotiation research is the value of any options that participants have during the negotiation process, e.g., accept, walk-away, etc. One of the most important options of all is what is known as the "Best Alternative to a Negotiated Agreement," (BATNA) which is simply the best option available to a negotiator should negotiations fail.
All options are defined by three dimensions: their value, their risk, and their expiration. Take, for example, someone who is granted early admission to her second-favorite college but has to respond before the response deadline of her favorite school. As in other scenarios, this applicant has to consider the quality of her second-favorite school (value), the probability that it will accept her (risk) and the last day early admissions acceptance is allowed (expiration). A job applicant with a written offer letter for a job he is willing to accept negotiating with a second possible employer has a similar set of dynamics to consider.
Research has shown that agents who have an acceptable BATNA generally do better in negotiations than those who do not have one. Strong BATNAs lead individuals to ask for higher prices and to take a more aggressive negotiating posture, for example. They are also willing to seek more value from their counterparty and to maximize the value of winning. In other words, having a positive BATNA will generally allow someone to maximize the value of a "winning hand."
Given the positive outcomes that a good BATNA can create, it is somewhat surprising that researchers have not examined what happens if a good BATNA is lost during (or just before) a negotiation, something that occurs with regularity. Does losing a good BATNA lead someone to take a lower price or assume a weaker negotiating stance? Does it impact negotiating aggressiveness or willingness to “settle for less?”
New research from Garrett L. Brady (LBS), M. Ena Inesi (LBS), and Thomas Mussweiler (LBS) looks at these questions in a comprehensive set of studies with some surprising results. The authors’ interest lies in part from the observation that, from a rational perspective, negotiators who lose an alternative are in the same position as those who never had that alternative in the first place. Logically, the authors note, "one may thus expect a lost alternative to have little effect on negotiation processes and outcomes." However, "previous research has demonstrated that negotiators’ past experiences—such as reaching an impasse in a preceding negotiation—powerfully influence the intentions with which they approach a subsequent negotiation as well as the outcomes they obtain." In light of this research, the authors hypothesized that losing a BATNA constitutes a "prior negotiation experience," and that this loss would indeed impact how people behave once the negotiation begins.
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