It’s an article of faith in negotiation that expanding the pie of value enhances the parties’ welfare. When there’s only one issue on the bargaining table, the size of the pie is fixed. If one party gets more, the other party gets less. But when multiple issues exist, negotiators can expand the size of the pie by engaging in give-and-take trading that leaves everyone better off. The more issues that are to trade, it would seem, the happier negotiators should be.
Work by Charles Naquin, who teaches at the University of Notre Dame’s Mendoza College of Business, challenges this conventional wisdow. Naquin found that subjects who negotiated a four-issue simulation were significantly more satisfied with their outcomes than those who worked with eight issues. Although the latter group created demonstrably more value, they were less pleased with their results.
Why? Naquin discovered that the less satisfied negotiators engaged in more counterfactual thinking: i.e., they tended to second-guess themselves. Having more issues in the mix meant there were many more options to explore. In hindsight, negotiators could imagine the possibility of a better outcome if only they had handled the talks differently.
Measuring satisfaction immediately after the negotiation, Naquin discovered participants’ tendency to dwell on positive results they may have missed instead of thinking about the larger number of bad deals that they avoided. It’s possible that their feelings might have changed – for better or worse – as time passed. On the other hand, one’s level of satisfaction upon reaching agreement is a crucial factor in negotiation. Indeed, if a high number of issues makes for low contentment, people might get stuck in a stalemate.
There is no easy prescription. Adding issues should increase potential value, but even if you’re immune to the negative emotional effects Naquin has found, you should consider whether increased complexity will lower your counterpart’s satisfaction – and hence, her willingness to settle. Narrowing the set of negotiable issues to a manageable number may not be optimal economically, but it may raise the odds of a better deal.
The fact is that even if there is only one distributive issue “the pie expands” the moment the parties reach an agreement. The reason is because each side has a different subjective perception of value of what is at stakes. When you agree to a voluntary exchange it is only because you value more what you are acquiring than what you are giving away. In a free market, you have to think of every voluntary exchange as a “gain – gain” outcome (forget the win -win nonsense).