Table of Contents
1. Introduction ...................................................................................................................... 1
2. Learning experience .......................................................................................................... 1
2.1 A brief factual description of the event ....................................................................................2
2.2 My personal experience during the event ................................................................................2
2.3 My personal reflection after the event .....................................................................................2
2.4 Scientific reflection based on scientific literature .....................................................................3
3. Conclusion and integration ................................................................................................ 3
References............................................................................................................................. 5
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1. Introduction
The expectations for the course Managing Negotiations were high. After reading the course
manual, I became invested and excited to learn more about negotiation. This was because I
realised that negotiation is everywhere in our day-to-day life, both in a professional and private
context. Although, my main goal was to learn more about negotiation as it would benefit my
future professional career. Furthermore, it was also thrilling having the option to put the
theoretical context into practice, which is rarely the case. Being able to practise my negotiation
technique was a factor as to why my exceptions for Managing Negotiations were high, but also
why I was looking forward to taking the course. The idea regarding how it would take place
could have been more evident for me, but also because I was somewhat sceptical of how much
there actually was to learn about negotiation. However, the goal was to improve my negation
skills, mostly in my professional life, to negotiate in areas such as salary, flexible working hours
and benefits. In addition, the course was also an excellent complement to my economics studies
back home.
Being in the middle of the semester, my motivation for the course was low to begin with.
However, after the first tutorial, it became clear that I needed to practise my negotiation skills
and the further the course proceeded, the more invested I became. This was because I realised
there is much more to negotiation than I previously thought. More importantly, many factors
affect the outcome of a negotiation. After the first tutorial, I immediately realised there was room
for improvement. Even though I was aware of biases existing, thanks to the course judgment and
decision-making, I was still affected by them. It did not take long until the anchoring effect hit
me, and I also realised that knowing many scenarios beforehand is not helpful if you forget them
in the heat of the moment, which happened to me. The seller in my negotiation presented a
relatively high initial price, making me adjust thereafter. The following section will discuss this
matter further.
2. Learning experience
The following section will describe my learning experience, such as an event that I remember
vividly and had an impact on me but also the emotional side to it.
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2.1 A brief factual description of the event
The case presented to me concerned a family named Smith, who was looking to buy a parking lot
closer to their home. The reservation point was €70 000, and the aspiration point was not
presented; however, it was concluded that the lower price, the better. I ended up with an
aspiration point of €57 000. After studying the case, the negotiations began. The seller presented
an initial price over €100 000, which caught me, as a buyer, off guard since I was not expecting
such a high initial price. Consequently, this made me assume that the bargaining zone was not
high, and I tended to rely too much on the first presented information. Since the sellers' initial
price was high, I was prone to think that around €70 000 was a fair price and a reasonable
benchmark. The negotiation ended at €66 000, which in the beginning felt like a fair price, but
when discovering other people's deals ultimately led me to realise that my deal was not as good
as I had previously thought.
2.2 My personal experience during the event
When given the part of a buyer, I was confident about how to proceed during the negotiation.
However, during the talks, it took only a short time until I was unconsciously affected by a
cognitive bias that I did not think of at the time. The seller presented a relatively high initial
price, and by doing so, he created an anchor, which I, at the time, did not think of. My given
reservation point was €70 000, and initially presenting a high price made me think that maybe I
should be satisfied with reaching just below my reservation point. Furthermore, setting a high
initial price made me think that the bargaining zone was limited when it was not as limited as
previously thought. The initial offer from the seller came in early, affecting my emotional
thinking. Am I overreaching, greedy and foolish were some of the thoughts during the
negotiation. Furthermore, I tried to use some “slicing-the-pie” strategies, such as determining my
reservation point and supporting the offer with facts to make it more trustable.
2.3 My personal reflection after the event
After the negotiations, I realised that I was too affected by the anchoring effect that the seller
presented and not only that, I also suffered from the winners-curse. The winners curse is the
regrettable state of affairs when you ‘win’ but feel like you should have asked for more.
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Reaching a deal at €66 000 was a deal I was satisfied with. However, when people began to
present their deals, I realised I could have tried to stand my ground a bit more. Furthermore, in
retrospect I should have had a stronger aspiration point and tried to make concessions towards
that end. Looking back, I realise that my aspiration point was not as precise as I wished. In
addition to this, it is also hard to negotiate about a parking spot when you are not really sure of
the average parking spot prices in the city. This also had an impact on me when the seller, who
was Dutch, presented a high offer, thus making me think that it might be reasonable.
Furthermore, I should have thought of the strategy to immediately re-anchor if the other party
opened first. This is something I will always carry with me in the future. However, being aware
of this tactic could have resulted in a different outcome. What if I, for instance, countered with
€45 000? Maybe we would have landed somewhere closer to my aspiration point.
2.4 Scientific reflection based on scientific literature
The anchoring bias is primarily why the negotiation I took place in resulted in this particular
outcome. The anchoring bias occurs when you focus too heavily on one piece of information and
make adjustments from there. This is insufficient. People make inaccurate final estimates due to
inaccurate adjustments from an initial value. That is what anchoring concerns, and it is a widely
known heuristic that affects everyday life. Imagine, for example, having two rows of numerical
expressions: 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1 and 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8. What is the product?
In the first example, people on average guessed 2250, and in the second example, the average
was 512. However, the answer should be the same. This is a clear example of when people make
estimates differently depending on how the information is presented. The first numerical
expression starts with a higher value making participants assume that the answer should be
higher. The opposite occurs in the other numerical expression. To conclude the example above, it
is clear that the first number in our head becomes the anchor (Tversky & Kahneman, 1974). This
is also what happened in the negotiation. The seller's first value of €100 000 worked as an anchor
for me.
Thaler (1988) presented two definitions of when the winning curse occurs. The one applicable to
the negotiation simulation is the second one: "the value of the tract is less than the expert's
estimate, so the winning firm is disappointed." The deal that the seller and I agreed on was a
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satisfying one for me. However, when realising the value of the deal that other negotiators
received ultimately made my deal less attractive, and I experienced the winners curse.
3. Conclusion and integration
Practising negotiation and experiencing it first-hand contributed more to my personal
development than if one should have just read about, for instance, the anchoring heuristic. I am
now more aware of biases existing around me than before. I also learned that I am on the softer
side of the bargaining continuum which can, for example, be due to cultural reasons. The
knowledge about negotiation I am taking with me will be used in many situations. However,
since I am graduating soon, it will firstly be used within job offers such as salary. I will use and
take advantage of creating value and then claiming value, meaning expanding the pie and then
slicing it. In addition, there are other interests than just salary when negotiating job offers. You
may value flexibility more than a €200 increase, for instance. Furthermore, one personal learning
goal for the future will be to develop a BATNA before entering job interviews and try to have
multiple offers simultaneously in case they are exploding offers. This also gives you slightly
more bargaining power.
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References
Thaler, Richard H. (1988). "Anomalies: The Winner's Curse." Journal of Economic Perspectives,
2 (1): 191-202. DOI:10.1257/jep.2.1.191
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases.
Science, 185(4157), 1124–1131. https://doi.org/10.1126/science.185.4157.1124
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