Alternative models of price behavior in dyadic negotiations: Market prices, reservation prices, and negotiator aspirations

Abstract

Three competing predictors of price are manipulated in a two-party distributive negotiation. These include prevailing market prices, negotiator reservation prices, and negotiator aspirations. We offer a cognitive interpretation of how each type of information is incorporated into the negotiator′s thought processes as an alternative cognitive reference point. In two studies varying the levels of these three factors, only reservation prices, not prevailing market prices or negotiator aspirations, account for significant variance in negotiated outcomes. Discussion is offered, suggesting that the negotiator as decision maker may experience a “dominant reference point” effect. When multiple pieces of relevant information are available, the negotiator may only be able to focus on one of them. Among the three predictors studied, the reservation price may be cognitively interpreted as the most absolute limit. © 1994 Academic Press, Inc.