CONTACT: GEORGE MCCRORY
100 Old Public Library
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
Release: Feb. 5, 2001
UI study examines deception in business negotiations
IOWA CITY, Iowa -- A University of Iowa study shows that honesty is the
best policy in negotiations, proving that your reputation can be tarnished
if you lie or misrepresent facts.
The UI study also found that most people are fairly honest in negotiations,
with only one out of seven people in the study resorting to deceptive tactics.
However, in high-stakes situations, the subjects in the study resorted to
more potent and direct lies.
"In negotiations, there are mixed motives, balancing self-interest
while maintaining personal integrity. We found that if you're going to interact
with the same person over and over, there's no incentive to be dishonest,"
said Terry Boles, study co-author and associate professor of management and
organizations at the UI's Henry B. Tippie College of Business.
The study not only has implications for traditional business negotiations,
but also can be used to understand behavior in online negotiations, such as
eBay auctions and other online bidding situations where individuals are anonymous
and there is often little opportunity to discover or punish unethical behavior,
Boles based the findings of the study entitled "Deception and Retribution
in Repeated Ultimatum Bargaining" on an experiment involving 220 UI students
engaged in four simulated negotiation games. The negotiations were conducted
in the Tippie College's computer lab, with students communicating via instant
messaging in an online setting.
The students were paired anonymously in roles of a proposer or a respondent.
In each game proposers divided resource "pies" ranging from $13
to $47, with respondents either accepting or rejecting the portion of the
pie they were offered. However, the respondents didn't always know the size
of the pie to be divided and were not always told these amounts after each
round. Proposers had a strategic advantage when they knew that respondents
did not know the size of the pie, creating opportunities for proposers to
deceive. If the size of the pie was later revealed, this allowed those respondents
who learned that they had been deceived to enact punishment on proposers in
later negotiations by rejecting their offers (which led to proposers receiving
Boles found that 86 percent of the negotiators didn't deceive their counterpart,
lie or misrepresent information, despite being given the opportunity. But
when the stakes were high, lies and misrepresentations increased significantly,
indicating that the temptation to deceive increases when potential profits
are large. Real money was used in the experiment, with students keeping any
money they earned in the trial.
Results showed that although proposers and responders chose deceptive strategies
almost equally, proposers told more outright lies. When proposers' lies were
revealed, responders punished them by rejecting their offers, even when the
proposer tried to recompense by offering more than half of the money available.
"This indicates that respondents were willing to take less for themselves
in order to punish deceitful behavior," Boles explained. "And they
also indicated that they had no desire to interact with dishonest proposers
in the future."
Boles co-authored the study with Rachel Cronson at the Wharton School at
the University of Pennsylvania and J. Keith Murnighan at the Kellogg School
at Northwestern University; it was published in the November 2000 edition
of "Organizational Behavior and Human Decision Processes."
For more information, contact Boles at (319) 335-0947 or email email@example.com.