Imagining Alternatives Can Help You Negotiate

People who imagine a good alternative often negotiate well.

Posted Jun 26, 2018

Ssolbergj CC0 via Wikimedia Commons
Source: Ssolbergj CC0 via Wikimedia Commons

It is often easier to negotiate with someone when you already have an alternative. For example, if you’re looking for a job and are negotiating salary for a job offer, it is easier to be aggressive in your negotiation if you have another job offer than if you don’t.  After all, with an alternative in hand, you can always walk away from the negotiation.

But, what if you don’t have an alternative?  Is there some advantage to imagining that you have another option?

This question was addressed in a paper in the July, 2018 issue of the Journal of Personality and Social Psychology by Michael Schaerer, Martin Schweinsberg, and Roderick Swaab.

In one study, for example, college undergraduates were given the task of selling a coffee mug to another person.  The seller was shown to a cubicle with a phone and was told they would interact with two different potential buyers via telephone.  They were told the mug was actually worth €5.  The first buyer was actually a confederate who either offered €8 or €0 for the mug. 

Half of the participants offered €0 were then asked to imagine that they had received a good offer for the mug prior to negotiating for a second time.  The other half of the particpants who had no alternative were not given these instructions. Then, participants negotiated with a second potential buyer who was an actual participant in the study.  The seller was asked to make the initial offer for the mug.  Then, the pair negotiated a price and tried to reach an agreement.

Unsurprisingly, participants with a strong alternative offer (€8) made higher initial offers for selling the mug than the people in the control condition who had no alternative and did not imagine alternatives.  Participants with a strong alternative also reached an agreement to sell the mug for a higher price than those with no alternatives.  Interestingly, participants who had no alternative, but imagined an alternative also made higher initial offers and reached a higher price for selling the mug than the participants who did not imagine an alternative. 

So, imagining a good alternative was just as effective as actually having an alternative.  The experimenters obtained this result in three other studies, each using slightly different methods and negotiation exercises.

Imagining alternatives is not always useful, of course.  In another study, participants who were asked to imagine that they had a poor alternative did make aggressive offers, and did not reach agreements that were as good as participants who imagined that they had an excellent alternative.

In addition, the benefit of imagining an alternative requires that the person imagining the good alternative makes the first offer.  If their opponent makes the first offer, that offer dominates the rest of the negotiation.  So, after imagining an alternative, it is important to then make the first offer.

Finally, being fixated on the alternative may make you less creative in the negotiation.  In a final study, participants engaged in a negotiation in which finding an agreement requires a creative solution.  In this case, the participants were trying to sell a restaurant to a buyer.  The buyer was willing to pay much less than the seller was willing to accept, so most people who engage in this negotiation walk away.  However, it turns out that scenario is set up so that after using the money from the sale to travel the world, the seller will be looking for a job.  The buyer will ultimately need someone to run the restaurant.  So, there is a creative solution in which the buyer pays the seller less immediately, but agrees to hire the seller later. 

Participants who imagine that they have a good alternative make aggressive offers for selling the restaurant.  As a result, their negotiation opponent is much more likely to walk away.  The combination of the aggressive initial offer and the fixation on the sales price makes it harder for these participants to reach the creative solution to the negotiation.

In many situations, though, it is useful to imagine an alternative even if you don’t have one.  This imagined alternative will give you the confidence to make a significant initial offer that can then influence the course of the rest of the negotiation.

References

Schaerer, M., Schweinsberg, M., & Swaab, R.I. (2018). Imaginary alternatives: The effects of mental simulation on powerless negotiators. Journal of Personality and Social Psychology, 115(1), 96-117.