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You are here: Home / Blog / Judgement Biases During Bargaining

Judgement Biases During Bargaining

July 26, 2016 By Harry Munsinger, J.D., Ph.D.

Psychologists have discovered several unconscious biases that influence the choices people make while negotiating.  The most important of these unconscious biases are anchoring, mental accounting, confirmation bias, herd behavior, and loss aversion.

Anchoring happens because people tend to attach their settlement expectations to a reference point generated during opening negotiations based on the first serious offers.  Settlements usually end up near the midpoint of these opening offers.  This means opening offers should be carefully considered.  If the opening offer is too low, it may by interpreted by the other side to mean you are not serious about negotiation or there is no zone of agreement.  As a result, the other side may avoid settlement talks and opt for litigation.  On the other hand, reasonable opening offers can get negotiations off to a good start.

Another judgment bias is mental accounting.  This refers to the tendency of people to separate assets into different accounts based on psychological factors, such as source of the money, purpose of the account, or specific assets like the house, rather than treating all financial assets as money equivalents.  Some clients attribute special importance to their house, even though a house is just money if it’s sold.  Many clients find it difficult to separate their emotional attachment to the house from its dollar value during negotiation.  This is not necessarily a problem, but the client needs to understand that their emotional attachment to the house may mean they receive less total value during asset division.

Confirmation bias is the tendency of people to search for and believe facts that support their initial strongly held opinions and ignore facts that contradict their beliefs.  For example, if one member of a divorcing couple has decided he deserves spousal support and a larger share of the community estate, he will selectively listen to and believe facts and comments that support his beliefs and ignore facts and comments that contradict his wish.  The most effective way to overcome confirmation bias is to have the neutral professionals act as “dissenting voices of reason” by presenting both viewpoints in a completely neutral manner.

Another serious judgment bias is herd behavior – the tendency to copy the behavior of others.  There are at least two reasons for herd behavior.  First is social pressure to conform because we want to be part of a group rather than an outsider.  Second, a large group of people may know things we don’t so it seems smart to copy them.  However, it’s generally not a good idea to follow the herd.  For example, if everyone you know got a litigated divorce, does that mean you should follow the herd and subject your family to the destructive influences of the courthouse?  Or should you choose a more dignified and constructive way to divorce and select the collaborative process?

Finally, people value assets they already own more highly than the same asset if it’s offered during negotiation.  This bias is called loss aversion and it means people value monetary gains and losses differently.  Loss aversion creates a stronger emotional reaction to a loss compared with a similar gain.  People dread losing money more than they value receiving the same amount of cash.  For example, if a pension plan or a savings account has their name on it, the person will be reluctant to give up that asset, even if doing so would gain them another asset of higher value.  Psychologically, the fact that the person’s name is on the asset makes it more valuable to them and they want to keep it, although another asset they are offered may have a higher dollar value.

By being aware of these unconscious judgment biases, clients and their attorneys can become more effective negotiators.

About Harry Munsinger, J.D., Ph.D.

Harry Munsinger practices collaborative and estate law in San Antonio. He has over twenty years experience resolving disputes involving divorce, probate, wills, and trusts. Harry was an adjunct law professor at the University of Texas and St. Mary’s University. He has published several textbooks and over forty psychological and legal articles. Harry has been a forensic psychology expert, a licensed psychologist and a litigator.

Filed Under: Blog, Harry Munsinger

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