The Power of Lost Alternatives in Negotiations

Keywords: Negotiation Alternatives Power Anchoring

Abstract: Alternatives to a negotiated agreement remains one of the strongest tools of influence within a negotiation. Considering alternatives are not signed deals, they remain probabilities that can potentially be lost. We expand the conception and implication of alternatives by exploring the significance of lost alternatives on negotiation outcomes. We test the impact of lost alternatives by assessing dual mechanisms, sense of power and anchoring, across four studies: three online and one using face-to-face negotiations (N = 2,275). Across our studies, we find lost alternatives have a sustained impact on negotiation strategies and subsequent outcomes via anchoring and not sense of power. Specifically, the strength of the lost alternative anchors the negotiator such that losing a strong alternative positively influences negotiated outcomes and weak alternatives negatively. This effect is mediated by changes in negotiator’s reservation price. The findings highlight the powerful impact alternatives have on negotiator strategies and outcomes.