Evidence on Egocentrism in Negotiation

Walster, Walster, and Berscheid (1978) proposed that parties’ interest in fairness is not purely objective, but that people may tend to overweigh the interpretations or fairness rules that favor themselves (see Diekmann, Samuels, Ross, & Bazerman, 1997). The result is that even though people display a preference for fairness, the desire for fairness in negotiated outcomes is easily biased in their own favor (for recent reviews, see Babcock & Loewenstein, 1997; Wade-Benzoni, Tenbrunsel, & Bazerman, 1997). This self-serving bias in assessment or interpretation has been referred to in the literature as egocentrism.

                Thompson and Loewenstein (1992) found evidence of egocentrism in reports of fairness, and that egocentrism reduced negotiators’ ability to come to agreement. In their first experiment, a negotiation over wages, participants played the role of either management or union. Participants in both roles prepared with the same case information. Before the negotiation, but after receiving their role assignments, parties were asked what they believed a fair outcome to be. These estimates were egocentrically biased: representatives of management tended to report that a lower wage was fairer. Parties then proceeded to trade bids until they would go on strike. Thompson and Loewenstein found that the amount of egocentric bias displayed in these pre-negotiation assessments of fairness predicted the length of time it would take parties to reach agreement. The greater egocentricity seen in the partie’s ex ante perceptions of fairness, the longer strikes tended to last. (See also replications by Babcock, Loewenstein, Issacharoof, & Camerer, 1995; Camerer & Loewenstein, 1993; Loewenstein et al., 1993.)

                In their second experiment, Thompson and Loewenstein varied the amount of information provided to participants. Some participants received only the bare facts about the case, whereas others received detailed background information that had been rated as “neutral” in pre-testing. It might be expected that more information should reduce uncertainty and facilitate agreement (Priest & Klein, 1984). However, Thompson and Loewenstein found that more information is associated with greater egocentrism. Those participants who received the background information tended to make more extreme self-serving estimates of a fair outcome (see also Camerer & Loewenstein, 1993). Furthermore, when participants were later tested for recall of the background information, they showed a self-serving recall bias in their tendency to best remember those facts that favored themselves. This self-serving recall effect has been replicated elsewhere (Camerer & Loewenstein, 1993; Loewenstein et al., 1993), and suggests that memory biases contribute to egocentrism during either encoding or retrieval.

Babcock et al. (1995) provided a clever demonstration of the biasing effect of self-interest on the encoding of information. The investigators varied the point at which the participants in the experiment learned which negotiation role they were to play. In particular, all participants received the same case background information, but some read it knowing their roles while others read it without knowing their roles. The results of this subtle manipulation were dramatic. Parties who know their roles before they read the case materials are four times as likely to reach impasse as are dyads who do not know their roles when they read that information. Those who know their roles from the outset also are significantly more egocentric both in their estimations of a fair solution and in their predictions of what a judge will determine to be the just outcome.

Participants in the studies cited here did not make their fairness judgments public. As such, these judgments could not be expected by the parties to influence the other participants’ negotiation behavior and thus were unlikely to be “strategic misrepresentations.” However, two studies (Babcock et al., 1995; Loewenstein et al., 1993) offered a specific incentive for participants to be accurate in these private fairness judgments. Participants were told that the individual whose fairness assessments came closest to the determinations of an objective third party would be given an extra cash award. This incentive did not eliminate egocentrism in participants’ interpretations of fairness, suggesting that their fairness reports reflect actual beliefs. 

Wade-Benzoni, Tenbrunsel, and Bazerman (1996) extended this work on egocentrism to a four-party social dilemma. All participants in their experiment were given identical information to prepare for the negotiation and were asked to report, both before and after negotiation, what they believed to be a fair allocation of limited resources among the four parties. The investigators report two important findings. First, communication reduces egocentrism, a result that replicated Thompson and Loewenstein’s (1992) finding that disputants’ interpretations of fairness are significantly closer after negotiation than before. Second, asymmetry in available payoffs increases egocentrism. When the four parties face identical payoffs, they tend to share common perceptions of fairness; when payoffs are varied among the four parties, perceptions of fairness are divergent. This finding replicates the highly consistent pattern observed elsewhere (Babcock & Olson, 1992; Camerer & Loewenstein, 1993; Diekmann, 1997; Diekmann et al., 1997; Messick & Sentis, 1983) that ambiguity in problem solving creates an opening in the decision-making process in which egocentrism can develop via differential interpretation of the facts and application of the relevant fairness rules.

(Source: Brewer, Marilynn B. & Hewstone, Miles. 2004. Applied Social Psychology. UK: Blackwell Publishing Ltd. pg. 277-279)

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