Mental Errors

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Irrational escalation

Irrational escalation, the continuation of a selected course of action beyond the point where it continues to make sense, is an error sometimes made by otherwise levelheaded businesspeople when they get into difficult and competitive negotiations. Some make this error because they cannot stand losing. Others get caught up in "auction fever," irrational behavior that surfaces when auctions and other bidding contests pit individuals against each other. To avoid irrational escalation:

  • Know your BATNA before you negotiate. Remind yourself that money you don't throw away on an overpriced deal is money you'll have available to invest in your other alternatives.
  • Prior to negotiations, work with your team to set a reasonable reservation price. If you decide on a number as a team, you'll be less tempted to escalate your price during a negotiation. In the event that new information arises, objectively recalculate your reservation price with your team.
  • Set clear breakpoints. During the negotiation, periodically stop and assess your situation to insure you aren't getting off track.

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