By Henner Gimpel
Negotiations are ubiquitous in enterprise, politics, and personal existence. in lots of circumstances their consequence is of serious value. but, negotiators often act irrationally and fail to arrive at the same time valuable agreements. Cognitive biases like overconfidence, egocentrism, and the legendary mounted pie phantasm normally foreclose ecocnomic effects. one more cognitive bias is the attachment influence: events are encouraged via their subjective expectancies shaped because of the alternate of deals, they shape reference issues, and loss aversion in all probability ends up in a metamorphosis of personal tastes whilst expectancies change.
This booklet offers a motivation, formalization, and substantiation of the attachment impression. Thereby, personal tastes and behaviour are approached from a microeconomic and a mental standpoint. experiments exhibit transparent proof for a scientific bias. the consequences can be utilized for prescriptive recommendation to negotiators: both for debiasing or to systematically have an effect on the counterparty.
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Additional info for Preferences in Negotiations: The Attachment Effect
Formalization in line with this perspective on the nature of preferences is outlined in the following. e. the consumer or the decision-maker, is via preference relations. The following exposition of this standard tool is mainly based on Kreps (1990, Ch. 2). g. 22 2 Theories on Preferences Kreps (1988) for the proofs of propositions or (Fishburn, 1970) for a more rigorous mathematical introduction. 3 Such a set can, for example, contain four alternatives: ‘buy nothing’, ‘buy good A’, ‘buy good B’, or ‘buy both’.
Summary The above presentation exempliﬁes a standard microeconomic model of preference, utility, and rational choice. 28 2 Theories on Preferences The most important issues to bear in mind for the subsequent analysis are the following: Microeconomic models of preference are concerned with alternatives an agent can choose from. If the alternatives are characterized by several issues, it is assumed that the agent can trade these issues oﬀ against each other (cf. negative transitivity). Preferences are formalized via preference relations and utility functions.
The implications can be extended to situations where the reference points do not coincide with the alternatives on any issue. Implications and Evidence Diﬀerent outcomes are compared via their diﬀerences on single issues. The relative weight of these diﬀerences depends on the location of the reference point. More speciﬁcally, it depends on the distance to the 44 2 Theories on Preferences reference point (diminishing sensitivity) and whether the diﬀerence is perceived as a gain or a loss (loss aversion).