Judgment in Managerial Decision Making, 8th Edition

CHAPTER TEN

Making Rational Decisions in Negotiations

When two or more parties need to reach a joint decision but have different preferences, they negotiate. They may not be sitting around a bargaining table; they may not be making explicit offers and counteroffers; they may even be making statements that suggest they are on the same side. But as long as their preferences concerning the joint decision are not identical, they have to negotiate to reach a mutually agreeable outcome.

Up to this point in the book, we have focused on individual decision making. Yet many managerial decisions are made in conjunction with other actors, and it is common for the different parties to have different interests. In this respect, negotiation is central to organizational life. But just as our individual decisions are often irrational, so, too, are our negotiated decisions—and for many of the same reasons. Negotiation outcomes are affected not only by our decisions, after all, but also by the decisions of others. This fact can make decision making in negotiation even more complicated than individual decision making. When negotiators improve the rationality of their decisions, they increase the likelihood of reaching an agreement when it is wise to do so as well as the quality of their negotiated outcomes.

People often believe that the outcomes they reached in a negotiation were inevitable. In fact, in most negotiations, a wide variety of outcomes are possible. When teaching negotiations to MBA ...