Psychology of Negotiation: Part IV – The Psychological Cost of Too Many Choices

How the Abundance of Options Leads to Regret

How do we measure success in negotiation outcomes? Is it determined by strong performance during the negotiation process and the achievement of profit expectations? Or is success reflected in the parties’ willingness to sit down again for future negotiations? If a negotiator gains economically from a chosen option but experiences psychological dissatisfaction, can the negotiation still be considered a success?

Success in negotiation is not measured solely by economic gains. It also involves post-negotiation satisfaction.

Researchers Richard Oliver, Sundar Balakrishnan, and Bruce Barry categorize negotiation outcomes into two types: economic outcomes, which refer to the objective allocation of resources, and social psychological outcomes, which refer to the subjective perceptions held by negotiating parties after the negotiation. While much of the literature has focused on economic outcomes, there is growing recognition that social psychological measures, such as satisfaction, are equally important.

Post-Negotiation Satisfaction and Future Interactions

Research by Novemsky and Schweitzer suggests that post-negotiation behavior can significantly influence future interactions between parties. Actions taken after a negotiation may shape preferences for repeated interactions, commitment to an agreement, or cooperation on issues not covered by the original deal. They theorize that “multiple conflict resolution episodes” link negotiation interactions over time, meaning that social perceptions, including outcome satisfaction, can predict future behavior.

Does the generation of options affect negotiator satisfaction? This chapter argues that it does.

Two Key Arguments of This Chapter

First, more options can lead to less satisfaction and greater regret. As the number of options on the negotiation table increases, so does the risk of dissatisfaction and regret.

Second, psychological value is as important as economic gain. When negotiators fail to achieve psychological satisfaction, feelings of regret may give rise to renewed conflict.

Psychological Factors Influencing Negotiator Satisfaction

Negotiator satisfaction is an important benchmark for evaluating negotiation outcomes. Satisfaction is influenced by psychological factors and plays a critical role in determining whether negotiators will follow through on an agreement or engage in future negotiations. Even when economic gains are substantial, negotiators may still feel dissatisfied. One contributing factor is the process of choosing among multiple options, which can reduce satisfaction.

Traditional negotiation theory often suggests that addressing multiple issues allows parties to “expand the pie” through trade-offs. However, this view is incomplete. When more options are available, negotiators are more likely to engage in counterfactual thinking, imagining how outcomes might have been better had they chosen differently. This tendency can reduce overall satisfaction.

Counterfactual Thinking: Imagining What Could Have Been

Counterfactual thoughts involve imagining better or worse outcomes than the one actually achieved. When negotiators select an option but continue to think about “what could have been” had another option been chosen, they engage in counterfactual thinking.

In a study by Charles Naquin involving graduate business students negotiating an employment package, participants who negotiated a greater number of issues were less satisfied than those who negotiated fewer issues, despite achieving objectively better outcomes. This finding suggests that negotiating more issues generates more counterfactual thinking, which in turn reduces satisfaction.

Regret and Forgone Options

Another post-negotiation response linked to the number of options is regret. Regret occurs when negotiators compare their actual outcome with what might have occurred had they chosen differently. Negotiators who select from a larger set of options are more likely to experience regret.

Irons and Hepburn describe two forms of regret: under-search regret, which arises from not searching enough for the best option, and over-search regret, which arises from settling on an inferior option after extensive searching.

Guthrie further observes that unless the option-generation process clearly identifies the best option, regret is likely to follow. This suggests that decision regret is a predictable consequence of generating too many options.

Hafner, White, and Handley explain that choosing one option from many requires giving up the opportunities associated with the foregone alternatives, leading to perceptions of loss and regret. Decision-makers may also become psychologically attached to the options they consider, making the chosen option feel like a loss. This phenomenon, known as “option attachment,” further increases dissatisfaction.

The Opportunity to Change Decisions and Reduced Satisfaction

The greater the number of alternative options, the more likely negotiators are to revisit or reconsider their decisions. A study by Gilbert and Ebert found that individuals who were allowed to change their decision after selecting a print were less satisfied than those who were not given that opportunity. This supports the conclusion that opportunity itself can breed regret.

Conclusion: Simplifying Choices for Better Satisfaction

Ultimately, having too many options forces negotiators to expend greater effort and rely more heavily on indirect or second-hand information rather than personal experience. This increases the likelihood of errors and psychological costs. While a wide range of options may make the decision-making process initially more engaging, it can also reduce satisfaction and increase regret.

Options involve trade-offs, and each trade-off carries psychological consequences. As Schwartz explains, more options result in more trade-offs, which in turn affect satisfaction. Limiting the number of negotiable issues to a manageable few may therefore lead to faster, more accurate decisions.

The key is to focus not only on economic outcomes but also on subjective outcomes such as satisfaction, happiness, and perceived success. While economic gains are important, agreements that lack party satisfaction are more likely to deteriorate over time.

By understanding the psychology of choice and option generation, negotiators can better balance economic and psychological outcomes, leading to more durable and satisfying agreements.

REFERENCES

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