The Power of Lost Alternatives in Negotiations

Having an attractive alternative is universally recognized as a fundamental source of power in negotiations. However, until recently, the literature on negotiation has ignored a fundamental characteristic of any alternative, namely the possibility that it may not materialize. If alternatives are inherently probabilistic, then what happens if negotiators lose an alternative? We explore the impact of lost alternatives on a subsequent negotiation. Across three studies (N = 1391), we demonstrate that the relative attractiveness of the lost alternative anchors negotiators’ aspirations and influences the aggressiveness of their first offer; both of which predict the quality of the negotiated outcome. Losing an attractive alternative thus leads negotiators to set more aggressive aspirations, make more aggressive first offers and ultimately obtain better outcomes. The present research highlights the powerful influence lost alternatives have on how negotiators prepare, behave and perform in a negotiation.