Negotiations and Bargaining

Behavioral decision making and game theory (BDMGT) is the umbrella term for a set of methods aimed at recording the choices and eliciting the decision preferences of individuals (organizational agents like managers, employees, entrepreneurs, investors, or consumers). BDMGT comprises a set of well-defined decision problems that, in contrast to surveys or questionnaires that rely on self-assessment, evaluate actual behavioral choices with well-defined outcomes and choice parameters. Additionally, in contrast to idealized models, BDMGT focuses on actual decision-making processes. BDMGT allows for dynamic and complex decision scenarios that are nevertheless computationally tractable and have lower linguistic demands (thus making inter-group and cross-cultural comparisons easier). BDMGT decision problems can be broadly categorized as either individual (i.e., where the agent acts against nature or luck, and all outcomes return to the agent) or social (i.e., where [at least one] another agent—“the partner”—is involved). Social decisions can be further defined as either non-strategic (i.e., where the partner makes no decisions, but some of the outcomes can be returned to them) or strategic (i.e., where the partner makes decisions that can affect the final outcomes returned to the agent). Examples of generic research questions for individual decision tasks include how risk influences decisions (i.e., measuring risk preferences) or (for social decision tasks) how agents interact with each other (i.e., how they allocate resources, what they consider fair, how they build trust, or how they coordinate to achieve common strategic goals). The present entry focuses on the methodological aspects of BDMGT. There are major methodological considerations and common pitfalls associated with BDMGT that can bias results and their interpretation, including incentives and how participants should be paid, anonymity, double-blinding (and when this is not enough), social desirability, how the “partner” participant is explained, or what issues may arise with repeated decisions or trials. The field has also seen the introduction of newer but well-established developments in the field, such as computerized testing, decision neuroscience, and augmented and virtual reality.

Interpersonal trust refers to confidence in another person (or between two persons) and a willingness to be vulnerable to him or her (or to each other). In contemporary organizational science, research conducted within organizations has extensively investigated personal, dyadic, and contextual factors that motivate interpersonal trust (i.e., trust between two persons) and the consequence of interpersonal trust for the trustor and the trustee. This line of work distinguishes between two orientations that researchers have taken when conceptualizing interpersonal trust: unidirectional trust and bidirectional trust. Unidirectional trust refers to a focus on one person’s trust in another without regard to the reciprocation of that trust. Unidirectional trust research investigates trust in another party at a higher hierarchy level (e.g., followers’ trust in the leader), a lower hierarchy level (e.g., the leader’s trust in followers), or at the same hierarchy level (e.g., employees’ trust in coworkers). Bidirectional trust focuses on the shared trust in a dyad. Research on bidirectional trust helps to provide insights about the complex pattern and evolution of interpersonal trust over time. However, research investigating bidirectional trust is relatively limited compared to unidirectional trust. Besides research on interpersonal trust within the same work unit, there is also a recent trend toward investigating interpersonal trust across work unit and organizational boundaries. Another important line of literature regarding interpersonal trust is the investigation of the causes and consequences of interpersonal trust violations and the effectiveness of remedies (e.g., apologies) for these violations.