Mental Accounting in Negotiations: Cognitive Segregation and Integration as a Means to Solve the Puzzle of Multi-issue Negotiations

In the present research, we investigate how negotiators cognitively process proposals, counterproposals, and outcomes when a broad set of issues is negotiated simultaneously. Building on mental-accounting research, we predict that negotiators strive to reduce the complexity of multi-issue negotiations by mentally creating topical subsets of issues and evaluating the outcomes for these subsets in a segregated way. This mental-accounting process is predicted to be a double-edged sword: creating mental accounts on integrative issue subsets will help parties to reduce the complexity and explore trade-off opportunities; However, creating mental accounts on non-integrative issue subsets will impede the discovery of win-win opportunities. Across six studies, we investigated the impact of topical mental accounting in interactive negotiations: parties that created integrative (vs. non-integrative vs. comprehensive vs. minimal) mental accounts achieved higher outcomes. Further, an integrated outcome-editing approach was examined to help parties to overcome the impediments of non-integrative topical mental accounting.