The_Essential_Manager_s_Handbook

416 / CONDUCTING NEGOTIATIONS

Understanding decision errors

ERROR DESCRIPTION

>>^ Acting contrary to your self-interest by increasing your

commitment to an original decision, despite the fact that

this decision produces negative outcomes (“throwing

good money after bad”).

>> Using a faulty anchor as a benchmark from which

to make adjustments and decisions. An ill-informed

home-buyer, for example, may use the seller’s asking

price as an anchor for their counteroffer, rather than

solid due diligence on home values.

>>^ Believing that you are more correct and accurate^

than you actually are. This leads to an overestimation

of your power within the negotiation, the options

open to you, and the probability of your success.

>> If you settle quickly on a deal when selling, feeling that

the “win” was too easy and that you could have gotten

more from the deal.

>>^ If you settle quickly on a deal when buying, thinking^

“I could have gotten this for less” or “What is wrong

with this item? I must have gotten a bad deal.”

Nonrational

escalation of

commitment

Anchoring and

adjustment

Overconfidence

The winner’s

curse

US_416-417_Avoiding_decision_traps_2.indd 416 30/05/16 3:07 pm