1 Perception, Cognition, and Emotion MGT 5374 Negotiation & Conflict Management PowerPoint10 John D. Blair, PhD Georgie G. & William B. Snyder Professor in Management Four major perceptual errors: 1.Stereotyping : Is a very common distortion Occurs when an individual assigns attributes to another solely on the basis of the other’s membership in a particular social or demographic category 2.Halo effects : Are similar to stereotypes Occur when an individual generalizes about a variety of attributes based on the knowledge of one attribute of an individual

2 Selective Perception and Projection 3.Selective perception: Perpetuates stereotypes or halo effects The perceiver singles out information that supports a prior belief but filters out contrary information 4.Projection: Arises out of a need to protect one’s own self- concept People assign to others the characteristics or feelings that they possess themselves

3 Cognitive Biases in Negotiation  Negotiators have a tendency to make systematic errors when they process information. These errors, collectively labeled cognitive biases, tend to impede negotiator performance.

4 Cognitive Biases  Irrational escalation of commitment  Mythical fixed-pie beliefs  Anchoring and adjustment  Issue framing and risk  Availability of information  The winner’s curse  Overconfidence  The law of small numbers  Self-serving biases  Endowment effect  Ignoring others’ cognitions  Reactive devaluation

5 Irrational Escalation of Commitment and Mythical Fixed-Pie Beliefs  Irrational escalation of commitment Negotiators maintain commitment to a course of action even when that commitment constitutes irrational behavior  Mythical fixed-pie beliefs Negotiators assume that all negotiations (not just some) involve a fixed pie

6 Anchoring and Adjustment and Issue Framing and Risk  Anchoring and adjustment The effect of the standard (anchor) against which subsequent adjustments (gains or losses) are measured The anchor might be based on faulty or incomplete information, thus be misleading  Issue framing and risk Frames can lead people to seek, avoid, or be neutral about risk in decision making and negotiation

7 Availability of Information and the Winner’s Curse  Availability of information Operates when information that is presented in vivid or attention-getting ways becomes easy to recall. Becomes central and critical in evaluating events and options  The winner’s curse The tendency to settle quickly on an item and then subsequently feel discomfort about a win that comes too easily

8 Overconfidence and The Law of Small Numbers  Overconfidence The tendency of negotiators to believe that their ability to be correct or accurate is greater than is actually true  The law of small numbers The tendency of people to draw conclusions from small sample sizes The smaller sample, the greater the possibility that past lessons will be erroneously used to infer what will happen in the future

9 Confidence or Overconfidence? We came to Iceland to advance the cause of peace...and though we put on the table the most far- reaching arms control proposal in history, the General Secretary rejected it. President Ronald Reagan to reporters, following completion of presummit arms control discussions in Reykjavik, Iceland, on October 12, I proposed an urgent meeting here because we had something to propose...The Americans came to this meeting empty handed. Secretary General Mikhail Gorbachev, Describing the same meeting to reporters.

10 Self-Serving Biases and Endowment Effect  Self-serving biases People often explain another person’s behavior by making attributions, either to the person or to the situation The tendency, known as fundamental attribution error, is to:  Overestimate the role of personal or internal factors  Underestimate the role of situational or external factors  Endowment effect The tendency to overvalue something you own or believe you possess

11 Ignoring Others’ Cognitions and Reactive Devaluation  Ignoring others’ cognitions Negotiators don’t bother to ask about the other party’s perceptions and thoughts This leaves them to work with incomplete information, and thus produces faulty results  Reactive devaluation The process of devaluing the other party’s concessions simply because the other party made them

12 Managing Misperceptions and Cognitive Biases in Negotiation The best advice that negotiators can follow is:  Be aware of the negative aspects of these biases  Discuss them in a structured manner within the team and with counterparts