The Effect of video-mediated communication on negotiations in fixed-pie situations. A comparison of pareto-efficiency with face-to- face communication

Seminar Paper, 2018

23 Pages, Grade: 1,3


Table of Contents

Table of Contents

List of Abbreviations

1. Introduction

2. Literature Review
2.1. Negotiation Paradigms, Processes and Outcomes
2.2. Negotiation Bias and the Mythical Fixed-Pie
2.3. Contributing Factors & Communication Means

3. Hypotheses Development
3.1. Hypotheses 1
3.2. Hypotheses 2
3.3. Hypotheses 3

4. Method & Research Design
4.1. Experiment
4.2. Brief Research Design

5. Discussion
5.1. Limitations of Experiments
5.2. Limitations of our study
5.3. Potential Strengths of other methods

6. Conclusion


List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

In today’s business world, you must be tough, smart and witty in order to succeed and to satisfy your superior. You run from meeting to meeting where you have to prove your case, so others vote for your alternative rather than the one from your colleague. Oftentimes you go into a negotiation still heated up from the meeting before, only knowing the target price you have to achieve and not looking for a valuable compromise. Chasing only after the biggest possible share of this fixed-pie and assuming the negotiator on the other side of the table does so too, hinders you from being a successful negotiator.

Furthermore, in sales negotiations you often try to achieve the highest selling price possible and if the other party cannot agree on a price close to that point, you sell the object for the minimum price that was given to you, so you will still satisfy your superior. If you cannot not manage to sell for the minimum price, you decline the offer, stop the negotiations and chose your ‘best alternative to negotiated agreement’ (BATNA). Unfortunately, many people go into negotiations not even knowing their own BATNA. In this case, a negotiator might sell the object for a lower price than the one that could have achieved without this negotiation. Good negotiators do not only know their own BATNA, they also have an approximate idea about the BATNA of the opposing party, so they can develop their strategy based on that knowledge and will more likely succeed in the negotiation.

The outcomes of negotiations do not only depend on the alternatives of each party or the asymmetric distribution of information, but also on the communication method the parties use. Depending on the position of each party it is more efficient to use a traditional face-to-face communication method or to make use of digital support, like video-mediated communication methods (VMC, i.e. Skype, facetime, etc.).

We would like to improve (integrative) negotiation outcomes by addressing the following question: does the use of VMC lead to more pareto-efficient results in fixed-pie situations? As technology becomes more and more advanced and business is mostly conducted within global environments, the way and method of communication becomes more relevant in the everyday economy.

Our paper tries to answer this question in the following way: first, we introduce the theory of with current aspects of digitalization. From the established theory, we derive three hypotheses and present our research design. After a brief discussion of the potentials and limitations of our experiment, we close with a short summary and an outlook to potential follow-up research.

2. Literature Review

2.1. Negotiation Paradigms, Processes and Outcomes

Negotiation research has seen a lot of different approaches, paradigms and schools of thought over time, so it is no surprise, that in the many years of negotiation research different definitions of negotiation have evolved. There are very simple definitions, such as “ Negotiations are discussions between two or more parties in order to solve differences ” (Pruitt & Carnevale, 1993). Although this is very easy to understand, in light of our research topic we want to focus more on the outcomes of negotiations. Therefore, we consider a negotiation to be “ an interpersonal decision-making process necessary whenever we cannot achieve our objectives single-handedly ” (Thompson, Wang & Gugia, 2010) in this research paper.

The key distinction between previous research paradigms is rooted in the definition of descriptive and normative research (Raiffa, 1982). Normative research, mostly derived from economics, mathematics and game theory, describes wise and all-knowing actors and tries to find pareto-optimal solutions to negotiation problems, while descriptive research looks at negotiators that do not always follow an optimal strategy or behave in a completely rational manner (Raiffa, 1982). In reality, pareto-optimal outcomes of negotiations are rare (Thompson, 2009), and as this study tries to give an explanation for suboptimal outcomes due to the use of different communication means, it is descriptive in its nature.

Before discussing possible negotiation issues, conflicts and strategies it is very important to understand the setting and possible outcomes of a negotiation as well as the key features of these negotiations and agreements. A negotiation generally has four basic kinds of outcomes (Carnevale & Kim, 2012):

1. Failure to reach any agreement (no agreement)
2. Agreement on some middle ground that connects the parties’ initial offers (compromise)
3. Victory for one negotiator (win-lose-agreement)
4. Mutually beneficial agreement (win-win-agreement)

To classify the result of a negotiation into such a category, it must be evaluated and the possibilities of evaluation are manifold. Intuitively, there is an objective value of a result, usually quantified in economically derived units or concepts, such as pareto- optimality (Thompson, Wang & Gugia, 2010). Another popular value categorization of a negotiation result is the subjective value, derived from social psychological outcomes, such as perceptions about the other party. Although these outcomes are by no means a “consolation prize” (Curhan, Elfenbein & Xu, 2006), as they can very well decide the possibility of future transactions, we want to focus on pareto-optimality for the valuation of results in this study.

Many negotiations are situations, where the negotiating parties have different motives before the process. These motives include competitive motives stemming from opposing preferences for some outcome options and cooperative motives arising from similar preferences for other options. (Carnevale & Kim, 2012).

This is further described by the integrative and distributive features (or: models) of a negotiation. Distributive features refer to how negotiating parties allocate scarce or fixed resources among each other, while integrative features describe the extent of satisfaction of both parties with the outcome (Thompson, Wang & Gugia, 2010). A result, that is highly integrative (i.e. win-win agreement) therefore implies a high degree of pareto-efficiency, as the definition of pareto-optimality describes an outcome that cannot be improved upon without hurting one or more of the parties involved (Pareto, 1935).

Therefore, a successful negotiation is highly dependent on the negotiating parties’ motives, assumptions and strategies. It is hard to reach a high degree of pareto- efficiency if one or both parties sticks to a completely distributive negotiation strategy (cf. Neale & Bazerman, 1983). Of course, choosing contradicting strategies or having wildly differing assumptions can lead to conflicts, mistakes and suboptimal results in a negotiation. Furthermore, a certain awareness level towards common negotiation phenomena and often occurring mistakes must be developed in order to reach more pareto-efficient solutions.

2.2. Negotiation Bias and the Mythical Fixed-Pie

Conflict can be defined as “a perceived divergence of interests, or a belief that the different parties ’ current aspirations cannot be achieved simultaneously ” (Rubin, Pruitt & Kim, 1994). Conflicts in negotiations are not only common, they often are also the causative factor for a negotiation to happen in the first place. This definition combined with our definition of a negotiation being “ an interpersonal decision- making process necessary whenever we cannot achieve our objectives single- handedly ” already shows a substantial contradiction in negotiation: a negotiation process serves the cause of achieving a party’s own objectives with both parties believing that the other party’s objectives cannot be fulfilled simultaneously, which we defined as win-lose agreement above. In previous negotiation research this fixation on win-lose situations is also called zero-sum situation (Katz-Navon & Goldschmidt, 2009). In terms of strategy in the negotiation and motives of the negotiator, this will lead to a fixation on a distributive negotiation strategy and a tendency to have a competitive motive going into the negotiation. This so-called fixed-pie assumption (or: mythical fixed-pie) of the distributive model constitutes one of the “ fundamental biases in human judgment ” (Bazerman, 1983). It is manifested by a negotiator’s tendency to believe, that the negotiating parties’ interests are diametrically opposed. (de Dreu, Koole & Steinel, 2000).

Examples, where this effect occurs, can be found in everyday situations, such as the popular illustration of the orange compromise (Follett, 1940), but also in more complex economic cases, like the housing market in the US around 1980 (Bazerman, 1983). In the former example, two sisters agreed to split an orange in half, although one sister only wanted the peel for a cake and the other only wanted to make juice. The latter describes the stop of a housing market due to a sharp increase in interest rates. Sellers still expected their properties to increase in value, while buyers couldn’t afford the prices under these circumstances. Both examples show a distributive approach to the problem and led to unsatisfying results for both negotiating parties due to suppression of efforts to search for an integrative solution approach (Neale & Bazerman, 1991). In negotiations with multiple objects of negotiation, negotiators imply that the other has the same preference structure (Carnevale & Kim, 2012). As this bias leads to distributive negotiation strategies, it tends to achieve suboptimal negotiation outcomes (Thompson & Hastie, 1990), so in order to maximize joint gains, this bias has to be reduced. Unfortunately, fixed-pie perceptions are very common in negotiators and resistant to change, even after lengthy negotiations with the other party (Thompson & Hastie, 1990).

Before discussing possible solutions to these zero-sum situations, it is imperative to understand reasons for its occurrence. Research suggests, that the win-lose orientation could be rooted in our society (i.e. sports, admission criteria for academic programs, promotion systems in companies), which promotes competitiveness and results in a distributive negotiation strategy (Bazerman, 1983). Another frequently proposed reason is the complexity of negotiations combined with the limited informationprocessing capacity of negotiators, resulting in a limited perception of potential solutions for the conflict (Pinkley, Griffith & Northcraft, 1995).

Solution approaches for fixed-pie perceptions, mostly formulated as strategies, are manifold but mostly take on the problem from a similar angle: trying to identify the interest of the other party to realize that these might not be diametrically opposed with own interests, which will usually achieve more integrative agreements (Klaming, Veenen & Leenes, 2008). In our example problems, communication of interests can lead to more pareto-efficient solutions: the sisters, instead of splitting the orange in half, one could get all the peel for her cake and all the pulp can be used for juice by the other sister. In the housing market example, knowing the preferences of the other party led to more creative solutions: as buyers could not afford houses due to the interest rates and not because they thought the price itself was too high, sellers offered creative financing solutions (e.g. seller financing) and the housing market accelerated again (Bazerman, 1983).

Although working out the details of an integrative solution might be more or less difficult depending on the concrete negotiation, this constitutes a relatively easy solution for the mythical fixed-pie: aim for more integrative (and creative) agreements. But there are many contributing factors influencing whether an agreement in general will be more distributive or integrative.

2.3. Contributing Factors & Communication Means

These factors can be classified into five different kind of levels: intrapersonal, interpersonal, group, organizational and virtual (Thompson, Wang & Gugia, 2010). On an intrapersonal level, researchers have focused on power (Magee, Galinsky & Gruenfeld, 2007), gender (Kray & Thompson, 2005) and mood (Forgas & Cromer, 2004) of the negotiator, while on an interpersonal level, aspects like emotions are explored (van Kleef, de Dreu & Manstead, 2004). The group level includes factors like culture (Drake, 1995) and group identity (Kramer & Brewer, 1984) of a negotiator. Research on the organizational level mostly focusses on the reputation of a negotiator (Glick & Croson, 2001). In our study we want to mainly focus on the virtual level and the intrapersonal factor of power in negotiations. More specifically, we will first cover the difference between virtual-mediated communication, especially video-mediated communication (VMC) and face-to-face negotiations. Then, we will explain the aspect of power in negotiations (i.e. in a sense of a reservation price of a negotiator).

In general results of studies about the impact of virtually-mediated negotiations are mixed (cf. Nadler & Shestowsky, 2006). Some research suggests, that objective results (i.e. pareto-efficiency) of a computer-mediated negotiation are less likely to be integrative in comparison to face-to-face negotiations (Arunachalam & Dilla, 1995). However, later research has found no reliable effect of the communication medium (Naquin & Paulson, 2003). It is important to note, that computer-mediated communication in these studies only concerns written or audio-only communication. Research has further shown, that face-to-face communication is strongest regarding “ social presence ”, followed by audio/visual (i.e. VMC) and audio. This means better cooperation levels of VMC in comparison to audio (Drolet & Morris, 2000), although there is no direct comparison to VMC. On the other hand, research suggests, that if a negotiator is individualistic, higher joint gains have been achieved with just audio (i.e. barrier between negotiators) in comparison to face-to-face, while participants with cooperative motives have been unaffected (Lewis & Fry, 1977).

At the time of conducting this study, we are not aware of negotiation research comparing face-to-face communication and VMC directly, but this direct comparison between face-to-face and VMC can be found in research about communication studies. It comes to the conclusion, that face-to-face communication is superior in task- performance (i.e. to convey the information in less words, more effective) due to a higher range of substitution of verbal expressions. However, VMC is superior to face- to-face in conversational flow (i.e. more organized turn-taking in conversation), leading to more formal communication (Doherty-Sneddon et al., 1997). Additionally, research has shown that face-to-face communication leads to more confidence in reaching a mutual agreement than VMC (Clark & Brennan, 1991).

Another comparison of face-to-face and VMC has been conducted in the field of psychotherapy. Although certainly not directly transferable to negotiations, this research has shown, that clients show more participation, take on more responsibility for the interaction and feel safer with openness in the conversation (Day & Schneider, 2002) with their therapist. The lack of research combining the comparison between face-to-face communication and VMC with fixed-pie perceptions in the field of negotiations has led us to conducting this study and in order to test the findings of those other research fields in the context of fixed-pie situations, we want to explain the contributing factor of power in more detail.


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The Effect of video-mediated communication on negotiations in fixed-pie situations. A comparison of pareto-efficiency with face-to- face communication
Technical University of Munich
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Seminararbeit mit Konzeption des Experiments, allerdings ohne Durchführung des Experiments.
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Marius Kohmann (Author), 2018, The Effect of video-mediated communication on negotiations in fixed-pie situations. A comparison of pareto-efficiency with face-to- face communication, Munich, GRIN Verlag,


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