The complex role of perspective taking in negotiations

To reach an agreement, successful negotiators typically need to understand two things: what they themselves are willing to accept, and what the other side is willing to accept. Understanding the other party's threshold requires perspective taking. In negotiations over goods or services, these judgments shape perceptions of the bargaining zone: the range of outcomes both parties would prefer to walking away without an agreement. The present paper examines how negotiators form perceptions of the bargaining zone. These perceptions have important downstream consequences, influencing everything from the offers negotiators make to the agreements they reach. We review work on how negotiators form perceptions of what their counterpart is willing to accept. Perspective taking can help negotiators estimate the lowest price a seller would accept or the highest price a buyer would pay. However, it can also lead negotiators to erroneously internalize the other party's perspective as if it is relevant to their own valuation. As an example, we demonstrate that buyers are willing to pay more for the same good when the seller gives up an entire endowment rather than only part of it, although the seller's end state should not affect buyer's willingness to pay for the good. These findings show how taking the other party's perspective can shape valuations, fairness judgments and negotiations outcomes. We conclude by discussing implications for multi-issue bargaining and strategic framing, highlighting how psychological heuristics and social context interact to shape outcomes in complex real-world situations, such as salary negotiations and real estate transactions.