Eyeing the Competition

By — on / Business Negotiations

Adapted from “Are We in Competition?” First published in the Negotiation newsletter.

Ford vs. GM. Coke vs. Pepsi. Oxford vs. Cambridge. These famous rivalries remind us that the top two achievers in a given realm often compete fiercely with each other. Researchers Stephen M. Garcia and Richard Gonzalez of the University of Michigan and Avishalom Tor of the University of Haifa have produced a useful series of studies on when competition between entities will exist—with findings that are relevant to all negotiators.

Their main finding: the degree of competition between two rivals depends on their proximity to a standard; thus, highly ranked competitors (No. 2 versus No. 3) will be more competitive than lower-ranked competitors (No. 202 versus No. 203). In addition, rivalry increases when two groups are competing to be included in a select group. Thus, No. 500 competes with No. 501 on the Fortune 500 list more than No. 103 competes with No. 104.

Garcia and his colleagues also assessed the degree to which one party will engage in self-sacrifice to keep a competitor from gaining a larger reward. Study participants were asked to choose one of two options: (1) they and their competitor would each receive a 5% earnings boost, or (2) they would receive a 10% earnings increase and their rivals would receive 25%. Parties ranked near the top of a select group tended to choose the first option.

These studies raise the possibility that the media’s attention to rankings may be creating dysfunctional competition that hurts society overall. Could, for instance, the popularity of BusinessWeek’s ratings of business schools have the unintended consequence of reducing cooperation among schools, hurting education and research as a result?

Perhaps most disturbing, the authors find that this pattern exists even when study participants are thinking about making decisions on behalf of not-for-profit organizations. It would be unfortunate if not-for-profits with a similar mission routinely engaged in dysfunctional competition rather than working together toward a common good. The overall lesson: Negotiators need to focus on the objectives of their organization rather than simply seek to win a competition.

Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.

Related Article: Are We in Competition?

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