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Set yourself up to make better choices
February 17, 2020 Featured Article

When weighing our options in negotiation, we try to focus on what matters most to us over the long term. Yet aspects of the decision-making process, many of them irrelevant, can interfere with our best judgment. In particular, the number of options we’re facing, the quest for the “perfect” choice, and status concerns can all get in the way of making a good decision.

Challenge No. 1: Information overload

We’re generally taught in negotiation that the more choices we have, the better off we’ll be. The presence of multiple options encourages us to make valuable tradeoffs across issues and increases our odds of reaching a mutually beneficial agreement.

But there’s something this commonsense logic overlooks: An excess of information can overload our minds and lead us to make poor choices. In a study by Georgia Tech College of Management professor Naresh Malhotra, heads of household were asked to make a hypothetical home purchase based on their actual preferences. Those who were given five houses to choose among were much better at picking a house that reflected their true preferences than were those who were given 25 houses to consider. When we feel overwhelmed by options, our thinking becomes more simplistic and intuitive. We might become paralyzed by indecision or make rash choices that we quickly regret.

Remedies: The negative effects of information overload have clear implications for agents, marketers, and salespeople: Offer clients and customers no more choices than they can reasonably be expected to weigh thoughtfully and deliberately. Though it depends on the context, making three offers that vary on different dimensions tends to be a sound rule of thumb.

When you’re the decision maker, notice when you feel overwhelmed by an array of choices, as that’s a sign you’re headed toward making a subpar decision. Take a step back, try to eliminate irrelevant and undesirable options from your choice set (or ask the seller to do so), and start fresh when the size of the decision is manageable.

Challenge No. 2: Perfectionistic decision making

When choosing among options, people have different goals. Some people tend to be maximizers—they set the goal of choosing the absolute best option for themselves or getting the very best deal possible. Others tend to be satisficers—that is, they settle for what seems “good enough” without worrying about whether an even better option lurks around the corner, Nobel Prize–winning economist Herbert Simon observed in the 1950s. A maximizer who’s booking an island vacation online might spend days or even weeks researching locations, resorts, and airfare. A satisficer, meanwhile, may devote just an hour or two comparison-shopping across websites and reading reviews.

“The goal of maximizing is a source of great dissatisfaction” due to the “tyranny of overwhelming choices” in modern life, writes Swarthmore College professor Barry Schwartz in his book The Paradox of Choice: Why More Is Less (Ecco, 2005). Sifting through the dizzying array of choices available to today’s consumers, maximizers may vacillate between feeling bored and feeling anxious. They’re also much more likely than satisficers to suffer buyer’s remorse, even if they end up with objectively better results, Schwartz has found in his research.

Remedies: To make the most of our limited time and maximize our contentment, we need to become comfortable with the idea of accepting “good enough” options, writes Schwartz. That can mean spending less time making decisions that don’t matter much, while giving weighty choices—such as which job to take, how best to save for retirement, and where to live—the close attention they deserve. By spending less time searching and negotiating for the “perfect” choice, we can free up time for more important matters—and be happier with our decisions.

Challenge No. 3: The outsized influence of scarcity

Imagine that you have a child who, over the course of several years, has talked you into agreeing to get a dog. (You are a cat person.) You head to the local animal shelter, reminding your child that you will choose a small, quiet, full-grown, well-trained dog or no dog at all. The only dog at the shelter that day is Susie, a large, enthusiastic puppy who barks a lot and loves jumping on you and licking your face. You are about to deliver a valuable life lesson to your child on patience and discernment when a shelter volunteer tells you that another family is planning to come back later in the day to give Susie a second look. You then learn that there haven’t been many dogs at the shelter lately. “Is she up to date on her shots?” you find yourself asking the volunteer.

Though she doesn’t check off any of your boxes, Susie could turn out to be the perfect dog for your family. But there’s also the real risk that you’re tempted to adopt her because she’s the only dog staring (and licking) you in the face.

According to the scarcity principle, “opportunities seem more valuable to us when they are less available,” writes Arizona State University professor Robert Cialdini in his book Influence: Science and Practice (Pearson, 2009). If encountering a plethora of options can paralyze us into inaction, facing seemingly scarce commodities can propel us toward rash decisions. Impatience, fear of missing out, aversion to suffering a loss, and our competitive instincts are just some of the factors that explain why commodities seem more attractive when they’re scarce.

Marketers often capitalize on the power of scarcity to provoke impulse purchases. Stores that have no intention of closing hold going-out-of-business sales. Shopping networks tick down the number of available items to jolt viewers into picking up their phones.

Sadly, the thrill that comes with acquiring a rare item tends to be fleeting. “The joy is not in the experiencing of a scarce commodity but in the possessing of it,” writes Cialdini.

Remedies: Take note of the panicky feeling that floods you when you crave a scarce resource, recommends Cialdini. Then think about why you crave it. Will it add value to your life? If it serves a useful purpose (whether a lawnmower, a rare book, or a loving puppy), remind yourself that it will function the same whether it’s scarce or plentiful. Then assess whether it’s really the right purchase for you—and if it is, resist the urge to overpay.

Challenge No. 4: The status trap

In a 1998 study, University of Vermont professor Sara J. Solnick and Harvard School of Health Policy professor David Hemenway presented participants with pairs of hypothetical personal circumstances and asked them to make a choice for each one. For each pair, the objectively inferior option was superior to what others were receiving, and the objectively superior option was inferior to what others were receiving. For example, participants were asked whether they’d prefer to earn (a) $50,000 annually when others earn $25,000, or (b) $100,000 a year when others earn $200,000. For most pairs, the majority of respondents chose the option with the worse objective outcome but the better relative position. Believe it or not, they said they’d take $50,000 rather than $100,000 so they could earn more than others.

In negotiation and beyond, we care a lot about how we measure up to others—so much that we might sacrifice money, time, and other valued resources just to feel superior. Unfortunately, the quest for status never really ends, so we never quite feel satisfied. As our social media accounts remind us by the minute, there are always new, more elusive heights to aim for.

Remedies: Not surprisingly, people who care less about how they stack up relative to others tend to be happier than those who engage in more frequent social comparisons, University of California, Riverside professor Sonja Lyubomirsky has found in her research. In addition, maximizers tend to be more prone to making social comparisons than satisficers, writes Schwartz in The Paradox of Choice. Consciously narrowing our decision set should help reduce our fixation on status. Contemplating what we value most in life—such as time with family and friends—can also help us reprioritize our negotiation goals.

Does familiarity breed indifference?

Because common items (such as vanilla ice cream in the realm of dessert) are so ubiquitous, people tend to assume that others prefer them over rarer, more exciting choices (such as tiramisu). In fact, people tend to prefer novel options to the familiar, researchers Emily S. Reit (Stanford University) and Clayton R. Critcher (University of California, Berkeley) find in a recent study. Knowledge of this preference could inspire sellers to produce more interesting products and price them more effectively.

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