Deal or No Deal: Are People Hard-Wired to Agree?

by Robin Pinkley|

Are people hard-wired to reach agreement, even when a deal is less than optimal or below a bottom line? According to new research by Management Professor Robin Pinkley and co-authors, as if force of habit, when faced with an offer people are reaching agreements and sealing deals when not agreeing might be a more rational choice. This phenomenon is based on the tendency of people being averse to impasse and attracted to agreement.

Research from a number of disciplines suggests people are hard-wired for cooperation, proving socially necessary for survival through the eons. In deal-making however, the tendency can undermine value. Pinkley mentions that the definition of negotiation in most dictionaries is to “reach agreement”— when it should be to reach agreement when optimal or more profitable than impasse. "We have created a bias toward agreement over obtaining value, which is the primary justification for negotiation," she says.

Pinkley thought about this tendency years ago when researching alternatives to the current deal as a form of power in negotiations with other researchers. "When people have alternatives to the current negotiation (say a job offer or business deal) they are reticent about walking away, even when an alternative is better," she recalls. "It was a puzzle to us, particularly given the many examples of these decisions we see in the press," Pinkley offers. People and firms are often accepting deals or paying too much when the evidence suggests that the company or sports figure will never provide a return on investment, notes Pinkley. Essentially people will pay a premium to reach agreement and avoid the risk of walking away.

The research

Pinkley and other researchers originally assumed that two drivers were required for people to accept sub-optimal agreements. One is informational or judgmental constraints. “Negotiators get confused about whether the value offered (and future value or performance) meet their economic interests," notes Pinkley. "The more complicated the negotiation, the more issues involved, and the less information people have about the long-term value of an offer, the more likely they will be to agree to avoid impasse." The other driver is that of relational concerns. Pinkley offers an example: "If I invest in you, you might like me more than you would otherwise, increasing your subjective value. Your subjective value might translate into you buying more from me down the road, meaning I gain more objective value, such as increased sales or a new customer referral.”

Pinkley and her co-coauthors conducted a series of studies to test whether this phenomenon remained when stripping away judgmental constraints and relational concerns. They hypothesized that agreement itself has a utility and impasse a disutility, thus driving people to accept agreement even if they were clear about the lack of other forms of subjective and objective utility. "Indeed, that is what we found,” recalls Pinkley. "It happens anyway. People want agreement."

To test their hypothesis, a series of games and allocation decisions were developed. The subjects were placed in online negotiation scenarios with strangers they would never meet (or sometimes anonymous classmates). The participants were told the amount of money that would be allocated should they reach "agreement" or choose “impasse.” They were informed about the amount the other party would receive –- sometimes receiving less, more, or an equal amount. In all cases, the subject received more money from an impasse than an agreement. Other subjects received exactly the same scenario with one exception. The options were labeled “option A” instead of “agreement” and “option B” instead of “impasse” with option B being the more beneficial outcome. Across studies, more participants selected the counterproductive or costly selection when it was labeled agreement (over impasse) than when it was labeled option A (over option B). They did so consistently.

"We subjected participants (including executive populations) to every type of test we could conjure to eliminate conflicting issues, and people still chose to avoid impasse," surmised Pinkley. People willingly paid a premium to agree and avoid impasse, the authors found. In their second series of studies, they tested whether people's willingness to give up value stems from an attraction toward agreement, an aversion to impasse, or both. The aversion to impasse was a stronger motivation than finding agreement, thus avoiding the seemingly negative idea of impasse. Participants selected the most personally disadvantageous options when it was framed to avoid impasse.

End game

People are willing to give up objective value to obtain an agreement and avoid impasse. Even when there was no uncertainty or confusion about gains or relationship issues, this was the case. Asked "when is impasse good, and when is it better to agree?" To think about negotiations rationally, Pinkley offered the following: "Tracking your own value means keeping your eye on your side of the playing field -- between your bottom line and target, or higher aspirational outcome." She continued, "You are successful if you obtain value anywhere between your bottom line and your target (though aiming for your target). Walk away if the deal is worse than the bottom line. The goal is to improve on your bottom line as much as possible."

The research illustrates that quickly-reached agreements do not always achieve the best outcome and impasse may be the most rational solution in many cases. The research findings imply that "agreement is itself a source of utility and impasse a source of disutility." The authors believe that the strategic use of the words "agreement" and "impasse" in negotiations may be useful in achieving higher value deals and stronger relationships. This will be a future line of research for Pinkley and her co-authors. About negotiations, Pinkley mentions, "I teach my students, customers and family members that one must give to get, but negotiation is about getting when you give. And, the healthiest relationships are about give and take."

Pinkley hopes to educate people about this counterintuitive tendency of agreeing to avoid impasse, which is detrimental in negotiations. "We have created a bias toward reaching agreement versus obtaining value," she concludes.

The paper "Agreement Attraction and Impasse Aversion: Reasons for Selecting a Poor Deal over No Deal at All" by Robin Pinkley of Cox School of Business, Southern Methodist University; Ece Tuncel of Webster University; Alexandra Mislin of American University; and Selin Kesebir of London Business School is under review at Psychological Science.

Written by Jennifer Warren.