This video simulation on power asymmetry and principal agent dynamics by Professor Lawrence Susskind and Robert Wilkinson was designed to give students insights into the challenges surrounding difficult conversations, both with people across the table, as well as with people on their own side. … Read Power Asymmetry and the Principal Agent Problem
Learn how to negotiate like a diplomat, think on your feet like an improv performer, and master job offer negotiation like a professional athlete when you download a copy of our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.
What is a Principal Agent in Negotiation?
In many business negotiations, you will find an agent negotiating on behalf of the principal party. This unique principal-agent relationship can cause challenges at the negotiating table.
Sometimes negotiations lead you out of your comfort zone and into unfamiliar territory. When you’re unsure of the issues under discussion or the rules of the game, you’d be wise to seek out an experienced agent. This principal agent then negotiates on the principal’s (your) behalf. One typical example is hiring a real estate agent to negotiate the sale or purchase of a home on your behalf.
At times, a principal agent can improve the quality of negotiations. When we lack the knowledge, experience, or access needed to carry out a particular negotiation effectively, hiring an agent can be a smart choice. However, even though agents can be indispensable in specific contexts, their role can be fraught with peril for the principal, as principal agent theory suggests.
This theory, which emerged in the 1970s from a number of economists and theorists, describes the pitfalls that often arise when one person or group, the “agent,” is representing another person or group, known as the “principal.”
Agents may have a different stake in the outcome or may receive different rewards than the principal. These types of imbalances in the negotiation may give rise to problems in the negotiation strategy. Whether they recognize it consciously or not (and research suggests that most don’t), even the most ethical agents routinely face a conflict of interest between recommending what’s best for you versus what would benefit them the most financially.
Whenever you decide to consult with negotiating advisers—but especially when you are anxious— be sure to vet them carefully, identify potential conflicts of interest, and factor their biases into the advice you receive.
Discover how to build a winning team and boost your business negotiation results in this free special report, Team-Building Strategies: Building a Winning Team for Your Organization, from Harvard Law School.
The following items are tagged principal agent:
Team-Building Strategies: Building a Winning Team for Your Organization
Discover how to build a winning team, find an effective negotiation “coach,” budget for negotiations training and boost your business negotiation results in this free special report from Harvard Law School. … Read More
How to Balance Your Own Values in Negotiation
What are the best negotiation examples from real life? Imagine that you’ve been negotiating the sale of a property that is owned by your company. The buyer has made an attractive offer that you’ve tentatively accepted. Your boss is pleased with the terms as they stand, but suggests that you go back to the buyer … Read How to Balance Your Own Values in Negotiation
Understanding the Negotiation Skills You Need to Negotiate with Friends and Family
Who achieves the best negotiated agreements: strangers, friends, or romantic partners? In a 1993 negotiation role-play simulation, Margaret Neale of Stanford University and Kathleen McGinn found that pairs of friends achieved higher joint gains than married couples and pairs of strangers. … Read More
How Principal Agent Theory Works in Business Negotiations: Dealmaking Strategies for Bargaining with Agents
The Program on Negotiation has identified three basic sets of circumstances in business negotiations where you’ll be better off tapping an agent (see also principal-agent theory) to take your place at the bargaining table (at least for part of the negotiating process): … Read More
What Can Business Negotiators Learn from Principal Agent Theory?
Learn how to navigate the principal-agent relationship with these insights from negotiation research. … Read More
Plan Your Curriculum for Next Semester
How do we utilize lessons learned from teaching online when returning to the classroom and planning a curriculum? After more than a year of remote learning, students and teachers alike are eager to return to classrooms in the fall. During the pandemic, however, many instructors made significant investments in online teaching resources, lesson plans, and … Read Plan Your Curriculum for Next Semester
Lessons Learned from Teaching Online: Pedagogy in a Pandemic
The exercises and videos developed for teaching online can also help improve in-person courses. As teachers and trainers around the world are working to transition their courses online and wondering about how their approach to teaching will be altered moving forward, the Teaching Negotiation Resource Center (TNRC) asked some of our experienced online teachers to share … Read More
Communicate Your Interests Behind the Deal
As integrative negotiations students know well, focusing on interests in negotiation has proven to be the most reliable way to create value and resolve conflicts. Experience indicates that communicating with your lawyers the motivations behind a deal or negotiated agreement is well worth the time. … Read Communicate Your Interests Behind the Deal
Negotiation Strategies: Seek Advice from Others When Negotiating
Negotiation skills in business communication and seeking advice from others, what are the potential benefits? Advice seeking inherently employs multiple self-presentation tactics (including ingratiation, self-promotion, and supplication), it allows us to improve both our competence and our likability. … Read More
The Impact of Anxiety and Emotions on Negotiations
Intense negotiation scenarios, we often choose to consult an expert for advice, preferably someone who has carried out hundreds of similar deals with great success. When we consult with others on our negotiations, we must weigh their advice against our own opinions and research. Past negotiation research finds that we tend to undervalue advice from … Read More
Teach Your Students Cross-Cultural Negotiation
As our world grows increasingly interconnected, we are more likely to find ourselves negotiating in a cross-cultural context. The diverse makeup of many societies and global nature of business today make cross-cultural negotiation a regular part of life. Also, unfortunately, many major disputes in need of resolution cross ethnic and cultural lines. Furthermore, it is important … Read Teach Your Students Cross-Cultural Negotiation
The Wired Negotiator: Using Technology in Negotiation
Everyone negotiates every day. How we negotiate is changing dramatically due to the use of various technological tools. People need not fear this change. Rather, they should understand the different technology at their disposal, grasp the pros and cons, and determine how to select the best medium to suit their needs, negotiation style, and approach. … Read More
Teach Your Students to Negotiate the Principal-Agent Relationship with Fie’s Agent
Negotiate International Sports Contracts In many business negotiations, especially those involving athletes, you will find an agent negotiating on behalf of the principal party. This unique principal-agent relationship can cause challenges at the negotiating table. The agent may have different preferences from their principal party. Agents may also have different incentives from the principal. Agents may … Read More
How to Avoid Preparing Unethical Negotiation Plans
To what degree should you level the playing field for your counterpart in negotiations? Let’s turn to the question of whether you have an ethical obligation to educate an uninformed buyer. … Read More
What Does Conflict Management Mean in Business Negotiations with Competitors?
They say it pays to keep your friends close and your enemies closer, but in business negotiation, keeping your enemies—or competitors—close could end you up in court, as Apple’s recent encounter with the U.S. Department of Justice suggests. The story begins back in 2007 when, unhappy with Amazon’s low, flat price of $9.99 for e-books, five … Read More
Securities fraud plea bargain
The Clearinghouse at PON offers hundreds of role simulations, from two-party, single-issue negotiations to complex multi-party exercises. United States v. Dunlop is a four-person, three-issue, two-round exercise between U.S. prosecutors, an executive charged with securities fraud, and defense counsel over the terms of a possible plea bargain; attorney-client interviews are followed by … Read Securities fraud plea bargain
Job termination and age discrimination
The Clearinghouse at PON offers hundreds of role simulations, from two-party, single-issue negotiations to complex multi-party exercises. Termination Tempest is a four-person, two-team settlement negotiation between a terminated employee and counsel, and the former employer and counsel, regarding possible settlement of an age discrimination lawsuit. Overview: Pat Thibideau had worked at Kane Restaurant Supply … Read Job termination and age discrimination