The Impact of Concession Patterns on Negotiations: When and Why Decreasing Concessions Lead to a Distributive Disadvantage

Kian Siong Tey, Michael Schaerer, Nikhil Madan and Roderick I. Swaab

Organizational Behavior and Human Decision Processes, 2021, vol. 165, issue C, 153-166

Abstract: We propose that making a series of decreasing concessions (e.g., $1,500–1,210–1,180–1,170) signals that negotiators are reaching their limit and that this results in a negotiation disadvantage for offer recipients. Although we find that most negotiators do not use this strategy naturally, seven studies (N = 2,311) demonstrate that decreasing concessions causes recipients to make less ambitious counteroffers (Studies 1–5) and reach worse deals (Study 2) in distributive negotiations. We find that this disadvantage occurs because decreasing concessions shape recipients’ expectations of the subsequent offers that will be made, which results in inflated perceptions of the counterparts’ reservation price relative to the other concession strategies (Study 3). In addition, we find that this disadvantage is particularly large when concessions decrease at a moderate rate (Study 4a) and when decreasing concessions takes place over more (vs. fewer) rounds (Study 4b). Finally, we find that recipients can protect themselves against the deleterious effects of decreasing concession by thinking of a target before they enter the negotiation (Study 5).

Keywords: Negotiations; Concessions; Reservation price; Offers; Signaling; Distributive (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jobhdp:v:165:y:2021:i:c:p:153-166

DOI: 10.1016/j.obhdp.2021.05.003

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