Negotiations

. Loss aversion creates an asymmetry that makes agreements difficult to reach as concessions can be seen as losses and cause much more pain than pleasure. Negotiations over a shrinking pie are especially difficult because they require an allocation of losses. On the other hand, people are much more receptive when bargaining over an expanding pie, ie negotiating over potential gains rather than losses.

. Negotiation is about communicating a reference point and providing an anchor to the other side. Sometimes messages in negotiations are not always sincere, ie pretend to have some attachment to a point of view that is really a bargaining chip (willing to give away in exchange for a concession).

. Like animals we fight harder to prevent losses than to achieve gains. This explains the success of defenders with territory holders winning the most challenges. This is similar to an organisation attempting to reform, restructure, etc itself. As any reform will produce winners and losers to achieve overall improved performance, whichever group has the most "political power"will prevail. For example, if the losers have the most political sway, the reforms will be weakened and results bias in their favour; like workforce reductions by attrition rather than by reduction, cuts in salaries and benefits apply only to future workers.

"...Loss aversion is a powerful conservative force that favours minimal changes from the status quo in the lives of both institutions and individuals...... reform will not pass. Those who stand to lose will fight harder than those who stand to gain..."

Daniel Kahneman 2012

 

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