Negotiation.

The first part of this paper traces a short history of the psychological study of negotiation. Although negotiation was an active research topic within social psychology in the 1960s and 1970s, in the 1980s, the behavioral decision perspective dominated. The 1990s has witnessed a rebirth of social factors in the psychological study of negotiation, including social relationships, egocentrism, motivated illusions, and emotion. The second part of this paper reviews five emerging research areas, each of which provides useful insight into how negotiators subjectively understand the negotiation: (a) mental models in negotiation; (b) how concerns of ethics, fairness, and values define the rules of the game being played; (c) how the selection of a communication medium impacts the way the game is played; (d) how cross-cultural issues in perception and behavior affect the negotiation game; and (e) how negotiators organize and simplify their understandings of the negotiation game when more than two actors are involved.

Betting on the future: the virtues of contingent contracts.

It happens all the time. Two parties with common interests fail to reach an agreement--about a sale, a merger, a technology transfer--because they have different expectations about the future. They are both so confident in their prediction, or so suspicious of the other side's motives, that they refuse to compromise. Such impasses are hard to break through. Fortunately, they can often be avoided altogether by using a straightforward but frequently overlooked type of agreement called a contingent contract. The terms of a contingent contract are not finalized until the uncertain event in question--the contingency--takes place. In some areas of business, such as compensation, contingent contracts are common: a CEO's pay is tied to the company's stock price, for instance. But in many business negotiations, contingent contracts are either ignored or rejected out of hand. That's mistake, according to the authors. In an increasingly uncertain world, flexible contingent contracts can actually be more rational and less risky than rigid, traditional ones. In particular, contingent contracts offer six benefits: they enable a difference of opinion to become the basis of an agreement, not an obstacle to it; they cancel out the biases of negotiators; they level the playing field by reducing the impact of asymmetric information; they provide a means of uncovering deceitful dealings; they reduce risk by sharing it among parties; and they motivate parties to fulfill their promises. While contingent contracts are not appropriate in all instances, they are much more broadly applicable than managers may think.

Broadening behavioral decision research: multiple levels of cognitive processing.

The area of behavioral decision research--specifically, the work on heuristics and biases--has had a tremendous influence on basic research, applied research, and application over the last 25 years. Its unique juxtaposition against economics has provided important benefits, but at the cost of leaving it disconnected from too much of psychology. This paper explores an expanded definition of behavioral decision research through the consideration of multiple levels of cognitive processing. Rather than being limited to how decision makers depart from optimality, we offer a broader analysis of how decision makers define the decision problem and link decisions to goals, as well as a more detailed focus on processes associated with implementing decisions.

Self-interest and fairness in problems of resource allocation: allocators versus recipients.

Two studies explored the tension between self-interest and the equality norm in problems of resource allocation. Study 1 presented graduate business students with a hypothetical task requiring them to make a series of managerial decisions. On learning the outcome of those decisions, they were asked to divide a bonus pool between self and a rival manager (who had opted for very different decisions and achieved either the same results as self on 2 criteria or a better result on 1 criterion and a worse result on the other criterion). Study 2 required Stanford and San Jose State undergraduates to consider the division of a hypothetical scholarship fund between candidates from their 2 schools. Data from both studies contrasted the apparent evenhandedness and lack of self-interest manifested by allocators with the self-serving responses of evaluators. Furthermore, when faced with different claims, participants were inclined to justify an unequal allocation of resources--provided that they, or a representative of their group, received the larger share--that few personally would have recommended, demanded, or imposed.