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By Carolina EderAnnalena Koehler
Anton Hristov Vilhelm Öhrn
Everyone uses negotiation in day to day life. Negotiation is a process in which a group or
involved parties resolve matters, by discussing and coming to an agreement.
To analyze negotiation rationally the negotiator has to understand the psychological forces which have a big impact on the negotiator´s effectiveness.
Structure problems Processes information Frame the situation
Situation adapted from Russo and Schoemaker
Difference between the two situations Actually for both it should be worth it to
invest the same amount of time First Scenario – Very Good deal Second Scenario – Not that attractive
◦ Frame represents percentage of discount
Situation Richard Thaler Content In both versions, the result is the same. No negotiation with the seller Percentage of elasticity of the demand of
the product Frame – high cost is expected at hotel
High cost is considered “rip-off” in the store
Those two examples show how importantframing is to solve problems and makeDecisions
Framing potential gains or potential losses Framed either as “gains” or “losses”
◦ Gains of similar value – prefer certainty over lottery
◦ Losses of sim. Value – prefer lottery over certainty
Example : $3500 gain considered a loss◦ Personal goal was a $5000 increase◦ Frame based on available information
(info not known – average raise = $2000)
Crucial in forming the Frame
◦ Basis for evaluating if option is a gain or loss
◦ Determine our willingness to accept/reject an option
◦ It is a result of our expectations
◦ Usually what we own is our automatic reference point
“Buyer” and “Seller” have different reference points◦ Seller – personal attachment to the object he owns◦ Values this attachment, therefore puts higher value◦ Buyer is not attached, he estimates a lower value
for an object
Ex: Coffee Mug priced from $.50 to $.9.50◦ Sellers - $7.12◦ Buyer – $2.88 (closer to market value)◦ Chooser - $3.12 (get $ or mug, no buying/selling)
Strategically manipulate framing to direct negotiation performance
Framing the options in terms of potential gain
◦ Situation perceived as more favorable
Same option Framed in terms of losses
◦ Lower chance of a favorable perception