Biased Beliefs in Negotiation

George Wu, Richard P. Larrick and Raegan Tennant

in The Oxford Handbook of Economic Conflict Resolution

Published in print September 2012 | ISBN: 9780199730858
Published online December 2012 | | DOI:

Series: Oxford Handbooks

Biased Beliefs in Negotiation

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  • Economics
  • Microeconomics
  • Econometrics and Mathematical Economics



This article discusses the settings in which beliefs systematically diverge from reality and identify impacts for bargaining behavior. It is organized around two categories of beliefs: those related to the structure of the negotiation and those germane to people in the negotiation. It also looks at two beliefs about the structure of negotiation: outside options and interests. Biases in these beliefs produce two large and systematic errors, the small pie bias and the fixed pie bias. It then describes the systematic biases that arise in the process of anticipating and learning about a negotiation counterpart. Erroneous beliefs about counterparts might be based on stereotypes, reputations, and general beliefs that negotiators hold about human nature. The small pie bias may possibly exist along with the misperception of personality. It finally offers some ideas and suggestions of where negotiation judgments research might be headed.

Keywords: bargaining; beliefs; negotiation; outside options; interests; small pie bias; fixed pie bias; stereotypes; reputations

Article.  5393 words. 

Subjects: Economics ; Microeconomics ; Econometrics and Mathematical Economics

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