Business Psychology - Latest Findings

Article No. 188
Business Practice Findings, by James Larsen, Ph.D.

A Cure for Fixed-Sum Reasoning

Researcher demonstrates a surprising antidote for fixed-sum reasoning.

There once was a prison inmate nicknamed "Kentucky" who surprised his counselor with his answer to this hypothetical situation: What would you do if your landlord refused to leave your apartment until you paid your overdue rent? Kentucky's answer: "Kill him." Pressed to elaborate, Kentucky explained that the landlord intended to kill him and striking first was a clear case of self defense. No jury would convict him.

So why was the landlord intending to kill him? "Because that's what I'd 'a done if I'd been him."

Of course murder is what Kentucky would do. He was a criminal, but Kentucky also revealed something rather ordinary. He was committing an error every one of us commits every day: he assumed other people were just like him, and this blinded him to other possibilities, as it blinds us, too.

How you ask?

Projecting your own preferences and intentions onto others leads us to characterize our dealings with people in win-lose terms, that is, that a favorable outcome for one party necessarily results in an unfavorable outcome for the other party. Researchers who study negotiating call this fixed-sum reasoning, which means that if you combine the bargaining outcomes for the two parties, you'll always get the same total. If two people divide $100 through bargaining, adding both shares will always equal $100. If two people negotiate for an apple pie, no matter how they divide it, their shares always add up to one pie.

What if one person doesn't like apple pie and really wants the pie plate or the recipe? Such a preference would come as a surprise to a pie lover afflicted with fixed-sum reasoning who is accustomed to projecting his/her own preferences onto others.

William Bottom, from Washington University in St. Louis, recently demonstrated a surprising antidote for fixed-sum reasoning: stereotyping. He conducted experiments in which he encouraged fixed-sum reasoning in some students and compared their bargaining outcomes to students he had encouraged to stereotype their bargaining opponents. He built into the experiment opportunities for bargainers to gain substantial increases in outcomes over a fixed-sum total, and he found that only the latter group of students were able to discover them and agree to take advantage of them.

Ordinarily we consider stereotyping to be a negative process that leads to prejudice, but Bottom sees it as a beginning for asking intelligent questions about differences between yourself and others, questions that encourage searching for the actual preferences of others. This questioning posture stands in stark contrast to fixed-sum reasoning.

Consider this common business example: rent for retail space.

Given two parties, one the owner of a shopping center and the other a retail shop owner searching for a location, fixed-sum reasoning for rent would result in a certain dollar amount, period. If it was too much, the retailer would look elsewhere, and both parties would lose.

Now notice the change that occurs when both parties begin with stereotypes of the other party. For example, a stereotype that the property owner has excess money and is looking for ways to assume risk to create the best possible return, paired against a stereotype that the retailer is small, poor, and operating on a close margin - that the bankruptcy wolf is always stalking nearby, and excessive rent could invite him in the door.

Of course these stereotypes may be wrong in specific cases, but they may also be right. What if they lead each party to look for unexpected preferences of the other party, preferences they don't share? Perhaps the shopping center owner would like to assume additional risk if it could lead to a greater return. Perhaps the retailer would be willing to reduce the danger of failure if sales should be disappointing by sharing some of the profits when sales are very good.

These preferences could lead to a rental agreement consisting of a low base rent combined with a percentage of gross sales over a threshold amount.

Stereotypes led to this outcome by replacing fixed-sum reasoning with honest curiosity. Rather than: "Of course he wants the same things I do," stereotypes lead to "I wonder if he fits the typical pattern and really desires ________ above all else? I think I'll investigate and find out."

Stereotyping is a thinking habit that can be very beneficial when it is used in negotiating.

Reference: Bottom, William P., and Paul W. Paese (1997) False Consensus, Stereotypic Cues, and the Perception of Integrative Potential in Negotiation. Journal of Applied Social Psychology, 27, 21, 1919-1940.

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