Have you ever had dealings with a bad-faith bargainer—the type of negotiator who seems to enjoy wasting your time by stalling, making outrageous demands, and calling talks off at the last minute?
Researchers Edy Glozman (Columbia Law School), Netta Barak-Corren (Harvard Law School), and Ilan Yaniv (Hebrew University of Jerusalem) dub such parties “false negotiators”—those who have ulterior motives for negotiating with you. False negotiators believe they have better alternatives to any offer you could make, yet they are motivated to try to sustain or improve their BATNA, or best alternative to a negotiated agreement, by negotiating with you. They might hope to use an offer from you to get a better deal elsewhere or to drive up the price in a bidding war, for example.
Let’s take a closer look at such bad-faith negotiations and how to avoid them.
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Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.
Amazon’s HQ2 Search: A False Auction?
In the fall of 2017, Amazon created a stir when it announced it was taking bids from North American cities and regions interested in hosting its second headquarters, called HQ2. Driven by the promise of 50,000 jobs and a $5 billion campus promised to be the “full equal” of Amazon’s main campus in Seattle, 238 North American cities and regions set to work crafting proposals. Applicants promised the company millions and even billions in tax incentives, subsidies, and infrastructure spending.
In January 2018, Amazon narrowed the race to 20 cities/regions. Amazon toured proposed sites, requested “reams of data,” and secured detailed guarantees of tax incentives and other perks, according to the Wall Street Journal.
In November, the news leaked that Amazon had decided to split HQ2 between Long Island City, a neighborhood in the New York City borough of Queens, and Crystal City, a neighborhood in Arlington, Va., near Washington, DC. The states of New York and Virginia reportedly offered Amazon up to $2 billion in tax incentives, as well as investments in infrastructure and job training.
Amazon already had a strong presence in New York and Washington, and both regions had long been obvious sites for expansion. Reaction to the news that HQ2 was being divided between the two most obvious front-runners was bitter. Cities and regions that hired high-priced consultants to painstakingly craft their proposals felt they’d been used. As for Amazon, it had scored months of free publicity and privileged information, such as infrastructure plans.
Amid the firestorm of criticism that followed, Amazon briefly canceled the New York arm of its plan—only to lease office space in Midtown Manhattan for more than 1,500 employees months later. Some critics called it further proof of bad-faith negotiations. In the years since, Amazon has aggressively expanded its New York footprint.
Beware Bad-Faith Negotiations
How can you identify and avoid bad-faith negotiations? An experiment by Glozman and colleagues offers some clues.
The researchers gave participants incentives to avoid making a deal in a negotiation simulation. These “false negotiators” succeeded in reaching impasse by:
- Deliberately extending the negotiation process
- Making irrelevant statements and rambling about unrelated issues
- Mentioning constraints to their ability to reach agreement
- Assigning a representative with no negotiating authority to take over from them at the end of the negotiation
Glozman and colleagues advise us to view an array of these behaviors as a “syndrome” of signals that a counterpart is bargaining in bad faith.
Bad-Faith “Auctions”
Bad-faith bargaining may be especially common in auctions. When a seller has a hot commodity to offer, they might try to get the best offer possible from top prospects by luring them into a bidding war. In such an auction, the seller may have no interest in doing business with most bidders but engages them to help drive up the sale price.
Bidders in an auction are more likely to overpay for a commodity or contract when the competition is especially fierce, as it was in Amazon’s contest. When everyone seems desperate to win a prize, “auction fever” can become an epidemic. Bidders afflicted with auction fever want to win at any cost, even if that means paying more than the item up for sale is worth. But once their “auction high” wears off, winners often end up regretting their purchase.
Lessons from Bad-Faith Negotiations
How can you avoid being drawn into value-destroying bad-faith negotiations?
- Before engaging with a counterpart, research their reputation in their industry. Take negative reviews and other red flags seriously.
- Be skeptical of counterparts who expect you to invest significant amounts of time and money just to negotiate with them.
- Determine your BATNA in advance, and vow not to accept anything less. Resist the urge to offer pricey incentives just to remain competitive.
- Look for signs of bad-faith negotiations, such as repeated delays and talk of constraints.
Have you identified any other hallmarks of bad-faith negotiations?
Claim your FREE copy: Business Negotiation Strategies: How to Negotiate Better Business Deals
Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.
