The price is right - Or is it? A reference point model of two-party price negotiations

Sally Blount*, Melissa C. Thomas-Hunt, Margaret A. Neale

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

32 Scopus citations

Abstract

This paper develops a social cognitive, reference point model of two-party price negotiations. The theoretical focus is on the role that reference points play as a means of calibration in the individual negotiator's decision processes and as a means of social influence in bargaining. Three studies are presented which examine how reference points based on personal preferences and budget constraints (i.e., reservation values) are combined with reference points based on available market information to affect outcomes. These studies support the interpretation that in captive transactions, contextual cues determine the extent to which market information versus reservation values influence outcomes. Certain contextual cues trigger perceptions of low versus high price variance, which in turn, lead negotiators to weight market information more or less heavily in internal processing and bargaining. When perceptions of low price variance are present, market information influences outcomes more than private reservation values. When perceptions of high price variance are present, reservation values tend to be more dominant in determining outcomes.

Original languageEnglish (US)
Pages (from-to)1-12
Number of pages12
JournalOrganizational Behavior and Human Decision Processes
Volume68
Issue number1
DOIs
StatePublished - Oct 1996

ASJC Scopus subject areas

  • Applied Psychology
  • Organizational Behavior and Human Resource Management

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