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In business negotiations, understanding the psychological forces that underpin negotiation processes is as important as mastering the substantive content of your deals. In a recent webinar for Cranfield alumni, Professor Javier Marcos highlighted how cognitive biases significantly influence negotiation outcomes. These unconscious mental shortcuts can derail even the most carefully planned negotiation strategy. He also explore 10 critical biases, how they might affect your negotiation outcomes, and how to minimise their potential negative effects.

Alumni who missed the session can , and don’t forget to  where Professor Marcos will continue to explore advanced negotiation strategies and real-world case studies.

1. Confirmation bias: Seeking what we already believe

Confirmation bias leads us to seek, interpret, and remember information that confirms our existing beliefs while discounting contradictory evidence. In negotiations, this manifests when we give more weight to arguments that support our position while dismissing valid points from the other party. For instance, a procurement manager becomes convinced that a supplier is untrustworthy based on a single missed deadline. In subsequent meetings, they notice only behaviors that reinforce this belief (late responses to emails, hesitation in answering questions) while overlooking positive actions (quality deliverables, proactive problem-solving). This selective perception damages the relationship and limits creative problem-solving.

Solution: Confirmation biases can be addressed by deliberately seeking disconfirming evidence, involving team members with different perspectives, and documenting both supporting and contradicting information.

2. Loss aversion: Fearing what we might lose

Loss aversion describes our tendency to prefer avoiding losses over acquiring equivalent gains. Research by Kahneman and Tversky suggests we feel the pain of losses approximately twice as strongly as the pleasure of equivalent gains. Imagine residential real estate negotiations in competitive markets, where buyers often become emotionally attached to a property and outbid each other, sometimes paying more than the asking price. Even when they know they're paying above market value, the fear of "losing" the house drives them to make economically irrational decisions.

Solution: You can minimise the effect of loss aversion by framing your proposals in terms of what the other party might lose rather than gain, and present agreements as ways to avoid future losses.

3. The anchoring effect: First impressions stick

The anchoring effect occurs when negotiators rely too heavily on the first piece of information encountered. Research shows that up to 50% of the variance in negotiation outcomes is directly related to the first offer.

In our MBA programmes we tested this assumption in a simulated negotiation, the selling of a manufacturing plant. Even though both parties had access to publicly available information (market value, book value etc) those who opened with high initial offers (even seemingly unreasonable ones) consistently achieved final prices closer to their target. Whether buying or selling, the party making the first move gained an advantage by creating a psychological reference point that influenced the entire negotiation.

Solution: If you find yourself negotiating and realising that the other party anchors first, use silence, diffuse the conversation to other topics, re-anchor with balanced data points, or give time for moderation.

4. Overconfidence bias: Believing we know more than we do

Overconfidence bias leads negotiators to overestimate their abilities, knowledge accuracy, and chances of success. This can result in inadequate preparation and unrealistic expectations. For instance, a procurement manager enters a contract renewal negotiation, certain they understand the supplier’s cost structure. Without conducting proper research, they make aggressive demands based on assumed margins. The supplier provides actual data showing much tighter margins, which could potentially damage the relationship and credibility.

Solution: To avoid the effects of overconfidence, you can document assumptions explicitly and test them, develop multiple scenarios including worst-case outcomes, seek input from colleagues with different expertise, and conduct a "premortem" (imagining the negotiation failed and analysing why).

5. Framing bias: How information is presented matters

Framing refers to how a problem or choice is presented. This bias occurs when decisions are influenced by presentation rather than the substance. A hospital physician presenting a treatment success rate of 90% will likely receive a different reaction from a patient than one presenting the same treatment with a 10% failure rate. Similarly, in negotiations, framing a contract change as "avoiding a 7% revenue loss" creates more urgency than "gaining a 7% efficiency."

Solution: Negotiators need to be aware of how others frame situations, actively reframe statements in different terms, and strategically frame their own offers to make them more appealing.

The fixed-pie bias is the assumption that negotiation is a zero-sum game where one party's gain necessarily means the other party's loss. Think about a supplier-customer negotiation, where the discussion, triggered by the customer, initially focuses solely on price reduction. The supplier insists that production cost increases make price cuts impossible, while the customer demands a 15% reduction. By exploring multiple issues simultaneously (delivery frequency, material specifications, payment terms, R&D collaboration, and contract length), they can create a solution with multiple trade-offs that benefit both parties beyond what a price-only negotiation could achieve.

Solution: To avoid the fixed-pie bias, discuss multiple issues simultaneously, identify differences in priorities and risk preferences, and ask questions to uncover interests behind positions.

The attribution error leads us to attribute others' behaviours to their character while attributing our own behaviours to circumstances. For instance when a counterpart is late to a meeting, we assume they’re disrespectful (character) but when we're late, we blame traffic (circumstance).

Imagine in a client consulting negotiation, the consultant delivers a proposal later than agreed and missing key information. The client immediately assumes the supplier is disorganised and doesn't value their business. However, the reality might be that the supplier's lead analyst had a family emergency, or the company experienced a cyber attack affecting critical pricing data.

Solution: To ensure attribution errors are in control, ask open questions about challenges encountered, determine whether behaviour is a pattern or anomaly, and consider what constraints might explain the observed behaviour.

We tend to overweight information that comes readily to mind, such as recent, vivid, or emotionally charged experiences. For instance when reviewing a job offer, candidates often fixate on the base salary figure while giving less attention to other valuable components like medical insurance, flexible work arrangements, career progression opportunities, or annual bonuses—elements that might actually contribute more to long-term satisfaction and compensation.

Solution: To limit the effect of the vividness bias, use checklists and frameworks to ensure comprehensive coverage of issues, conduct systematic research rather than relying on top-of-mind information, and document priorities before entering negotiations.

The sunk cost fallacy (sometimes also referred to as escalation of commitment) leads negotiators to continue a course of action based on previously invested resources that cannot be recovered, rather than on future benefits. In a classic auction experiment, participants bid on a £20 note with two rules: the highest bidder wins the note, but the second-highest bidder must also pay their bid amount while receiving nothing. This regularly results in bids exceeding £20 as participants try to "recover" their investment, sometimes paying £26 or more for a £20 note.

Solution: To avoid the sunk cost fallacy, regularly reassess your BATNA (Best Alternative To a Negotiated Agreement), set clear walkaway points, focus on forward-looking assessments, and separate historical investments from future prospects.

Cultural cognitive biases involve applying culturally-based assumptions to negotiations with those from different backgrounds. Consider a Western country executive preparing to establish a joint venture in Japan, who creates a comprehensive slide deck with detailed financial projections and clear next steps. S/he assumes his/her direct communication style demonstrates efficiency and preparation. However, her Japanese counterparts find this approach uncomfortably abrupt, prefer relationship building before substantive discussion, and make decisions through consensus rather than individual authority. When they respond with "We find this point interesting and we'll consider it," s/he incorrectly interprets this as acceptance rather than polite questioning.

Solution: When negotiating internationally, pay attention to differences in communication styles, decision-making processes, time orientation, risk tolerance, and relationship emphasis.

Conclusion

Cognitive biases cannot be completely eliminated—they're hardwired into how our brains process information. However, awareness is the first step toward mitigation of undesired effects. By recognising these patterns, negotiators can implement strategies to reduce their negative impact and sometimes even leverage biases strategically to create more value for all parties.

The most successful negotiators are not necessarily those with the most aggressive tactics, but rather those who best understand the psychological underpinnings of human decision-making.

Ready to transform your negotiation outcomes?

The strategies outlined above represent just a glimpse of the comprehensive approach taught in the Cranfield Strategic Negotiation Programme. This immersive experience goes beyond theory, offering hands-on practice with professional behavioural experts in realistic scenarios that challenge and refine your skills. Our next programme runs from 30 September to 2 October 2025 and Cranfield alumni receive a 20% discount on course fees. Register or secure your place by emailing Cranfield Executive Development.

Additionally, by , you can:

• Access expert articles from our Knowledge Hub
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Cranfield alumni can also access articles on negotiation via their Alumni Library Online (ALO).