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Psychology of Negotiation
Negotiation is an important business skill. In the ARBUS300 class, we learned that
buyers and sellers negotiate in a positive bargaining zone between the buyer’s and
seller’s reservation prices. A good strategy is to give an optimistic but respectable first
offer and prepare to make concessions. Keeping one’s reservation price secret while
researching the other party’s reservation price improves the chances of getting a better
deal.
Robert Cialdini suggested six principles of persuasion based on human behavior. The
first principle, reciprocity, forms the basis of the strategy of making concessions. People
generally feel obliged to “return favors, pay back debts, and treat others as they treat
us” (Cialdini's). When one party makes a concession, the other is likely to be open to
making a similar concession. By making an optimistic initial offer, there is room to give
concession while still staying close to the target price. A concession is seen as more
valuable, when it is close to the reservation price, so the reservation price should be
kept secret.
People generally like to be consistent. Once a person is committed to a view or an idea,
they will generally continue to support the view, even if circumstances change. This
leads to the ‘foot in the door’ technique, where a smaller or more attractive proposition
precedes a larger one. When negotiating, one could offer a very attractive deal, only to
swap it with a less attractive one when the person agrees. The less attractive deal is
now more likely to be accepted than if it had been offered initially.
Social proof means that people will generally behave the same way as others they
perceive. If the buyer or seller in a negotiation thinks that other buyers and sellers are
accepting deals for similar products at a certain price, they are more likely to accept a
similar price. A negotiator who can convince the other party of the standard deal price
will be able to get a better deal.
People are easily influenced by those they like. It’s often not easy for negotiators to get
the other party to like them, since they have opposing goals during the negotiation
process. One strategy is to highlight similarities with the other party, as people generally
like those that are similar to themselves. Repeatedly buying or selling to the same party
may also be helpful, as familiarity can build trust.
Those in authority tend to be very influential. A negotiator who is very knowledgeable
about the product they are buying or selling will be more likely to get a good deal. They
can also appeal to authoritative figures such as field experts when trying to convince the
other party of the value of a product.
Things that appear scarce are usually overvalued. Negotiators should attempt to
convince the other part of the scarcity of his or her product. Putting a time limit on an
offer is a good way to simulate scarcity. An item perceived as scarce will fetch a higher
price.
Cialdini’s principles of persuasion can be easily applied to negotiation. By using these
principles, a negotiator will be more likely to get a deal closer to his or her target price.
Some of these strategies may be somewhat underhanded though, so a negotiator
should consider the circumstances in which they are used.
Works Cited
Cialdini's Six Principles of Influence: Convincing Others to Say. (n.d.). Retrieved March
21, 2015, from http://www.mindtools.com/pages/article/six-principlesinfluence.htm