Improve Your Decision Making in Negotiation

When weighing offers in negotiation, we try to focus on what matters most to us over the short and long term—but irrelevant factors can lead us astray. Here are some common pitfalls, plus advice on how to improve your decision making in negotiation.

Challenge No. 1: Information Overload

We’re generally taught that the more choices we have in a negotiation, the better off we’ll be. Having multiple options encourages us to make valuable trade-offs and promotes mutually beneficial agreements.

But this commonsense logic overlooks the fact that an excess of information can overload our minds and lead to poor decision making in negotiation. In a classic study by Georgia Tech Professor Naresh Malhotra, heads of household were asked to make a hypothetical home purchase based on their actual preferences. Those asked to choose among five houses were much better at picking a house that reflected their true preferences than those given 25 houses to consider. When we feel overwhelmed by options, our thinking becomes more simplistic and intuitive. We might become paralyzed by indecision or make rash choices that we later regret.

Remedies: Offer clients and customers no more choices than they can reasonably be expected to weigh thoughtfully. In general, making three offers that vary on different dimensions is a good rule of thumb.

When you’re the decision maker, notice when you feel overwhelmed by choices. Try to eliminate options (or ask the seller to do so), and start fresh when the decision is more manageable.

Challenge No. 2: Perfectionistic Decision Making in Negotiation

When choosing among options, people have different goals. Some are maximizers: They aim to get the very best deal possible. Others are satisficers: They settle for “good enough,” economist Herbert Simon observed in the 1950s. A maximizer who’s booking an island vacation might spend weeks researching locations, resorts, and airfare. A satisficer, meanwhile, may devote just an hour or two to comparison shopping.

“The goal of maximizing is a source of great dissatisfaction” due to the “tyranny of overwhelming choices” in modern life, writes Barry Schwartz in The Paradox of Choice: Why More Is Less. Maximizers are much more likely than satisficers to suffer buyer’s remorse, even if they end up with objectively better results, he found in his research.

Remedies: To make the most of our time, we need to become comfortable accepting “good enough” options, writes Schwartz. That can mean spending less time making decisions that don’t matter much, while giving weighty choices—such as which job to take, how best to save for retirement, and where to live—the close attention they deserve.

Challenge No. 3: The Outsized Influence of Scarcity

According to the scarcity principle, “opportunities seem more valuable to us when they are less available,” writes Robert Cialdini in his book The Paradox of Choice: Whey More is Less. If encountering a plethora of options can paralyze us into inaction, facing seemingly scarce commodities can propel us toward rash decision making in negotiation. Impatience, fear of missing out, loss aversion, and our competitive instincts explain why commodities seem more attractive when they’re scarce.

Negotiators often capitalize on the power of scarcity to prompt impulse decisions. Stores that have no intention of closing hold going-out-of-business sales. Shopping networks tick down the number of available items to prompt viewers to grab their phones. In job negotiations, hiring organizations make exploding offers.

Sadly, the thrill of acquiring a rare item tends to be fleeting. “The joy is not in the experiencing of a scarce commodity but in the possessing of it,” writes Cialdini.

Remedies: Take note of the panicky feeling that floods you when you crave a scarce resource, recommends Cialdini. Then think about why you crave it. Will it add value to your life? Remind yourself that it will function the same whether it’s scarce or plentiful. Then assess whether it’s really the right purchase for you—and if it is, resist the urge to overpay.

Challenge No. 4: The Status Trap

In a 1998 study, researchers Sara J. Solnick and David Hemenway presented participants with pairs of choices in which the objectively inferior option was superior to what others were receiving, and the objectively superior option was inferior to what others were receiving.

For example, participants were asked whether they’d prefer to earn (a) $50,000 annually when others earn $25,000 or (b) $100,000 a year when others earn $200,000.

For most pairs, the majority of respondents chose the option with the worse objective outcome but the better relative position. Believe it or not, they said they’d take $50,000 rather than $100,000 so they could earn more than others.

In negotiation and beyond, we care a lot about how we measure up to others—so much so that we sacrifice money, time, and other valued resources just to feel superior. Unfortunately, the quest for status never ends, and we never quite feel satisfied.

Remedies: Not surprisingly, people who care less about how they stack up relative to others tend to be happier than those who engage in more frequent social comparisons, University of California, Riverside Professor Sonja Lyubomirsky has found. In addition, maximizers tend to be more prone to making social comparisons than satisficers, according to Schwartz. Consciously narrowing our decision set can reduce a status fixation. Contemplating what we value most—such as time with family and friends—can also help us reprioritize negotiation goals.

What other strategies have you found useful for improving decision making in negotiation?