Getting to NO: Theory and Evidence for Instrumental Negotiations

Abstract

A substantial literature has examined negotiation problems. Throughout this literature, scholars have assumed that participants approach negotiations with the intent of reaching a deal and that negotiation participants cannot be significantly harmed by the negotiation process. In this paper, we challenge these assumptions. We define situations in which negotiators use the negotiation process to achieve goals other than reaching a potential agreement as instrumental negotiations. We explore the implications of this broader conceptualization of negotiations both theoretically and experimentally. We demonstrate that the mere possibility of encountering an instrumental negotiator significantly changes Nash equilibria and actual behavior; some negotiators are harmed by instrumental negotiators and other negotiators reject sincere overtures to negotiate. The possibility of instrumental negotiations significantly harms profits. We consider theoretical, prescriptive, and policy implications of these results.