Negotiators are often taught that the more alternatives they have, the more fortunate they are. If it’s good to have one strong best alternative to a negotiated agreement, or BATNA, then it’s better to have many alternatives, right?
Not necessarily, results from a new study by Michael Schaerer of INSEAD and his colleagues show. In a series of experiments, the researchers gave participants either one alternative to their current negotiation or several. Across the studies, those who had more than one alternative perceived the bargaining zone to be less advantageous to them and made less-ambitious first offers than those who had only one alternative.
In one of the experiments, for example, where participants had to sell a coffee maker to another participant, the less-ambitious first offers of those with multiple alternatives resulted in worse outcomes as compared to those with just one alternative. These results were found regardless of whether the average price of the multiple alternatives was higher (e.g., $85, $80, and $75) or lower (e.g., $75, $70, and $65) than the price in the single-alternative condition ($75).
The researchers found evidence that a range of offers serves as a more powerful anchor than a single offer in affecting our perceptions of the bargaining zone. For example, suppose that a seller is trying to negotiate the price of a coffee maker and has already secured an alternative offer of $75. This seller is likely to construe the offer of $75 as more attractive (and less likely to bargain harder) if she also has two other offers of $70 and $65 than if she has only the one offer of $75. In effect, alternatives worse than one’s BATNA, which should be irrelevant to our decision making, anchor our expectations and first offers downward.
There are limits to this effect: The researchers found that multiple alternatives reduce first offers only when negotiators thought about their first offers in purely numeric ways (e.g., “Should I ask for $90 or $85?”), rather than more descriptively (e.g., “Should I make a moderate or high first offer?”), and lead to worse outcomes only when participants made the first offer themselves rather than responding to a counterpart’s first offer.
Don’t take these results as permission to stop looking for strong alternatives after identifying one solid BATNA, as this could lead you to end the search too early. Rather, after identifying multiple alternatives, do your best to focus on the one you value most and try to put the others out of your mind.
Resource: “Bargaining Zone Distortion in Negotiations: The Elusive Power of Multiple Alternatives,” by Michael Schaerer, David D. Loschelder, and Roderick I. Swaab. Organizational Behavior and Human Decision Processes, 2016.