W6: Agents and Ethics

5 advantages of using agents: (EEAKN)

Agents have/provide:

1. Expertise (process)

2. Knowledge (eg. about the industry)

3. Network (know a lot of people)

4. Emotional detachment

5. Anonymity (you can save face)

Possible scenarios of Price (ZOPA) + interests

• Can have positive ZOPA, but diverging interests

• Can have aligning interests, but negative ZOPA

4 risks of using agents: (MCIA)

1. Miscommunication

2. Cost incurred → shrinking ZOPA

3. Incompatible incentives

4. Agreement bias (accepting a deal not initially agreed on)

R/S between real estate agents’ efforts and incentives

Their efforts in fighting for a higher price only produces a minimal financial reward for them

What may this motivate them to do instead?

They might be motivated to prioritise a quicker sale over maximising the final sale price for the owner

What do you never reveal to your agent? (Thomson, 2005)

Your BATNA

Four things in a checklist to effectively work with agents: (IBAI)

1. Interests

2. BRA

3. Authority

4. Incentives 

Interests

Goals & issues:

• Figure out and clearly communicate what your goals are

• Specify what issues you care more/less about

BRA

• Communicate your RP and AP

• Create ambition and specify limits

Authority

• Clarify what can and can’t be shared or accepted

• Be careful not to disempower your agent 

Incentives

• Clarify and align definitions of success & incentives

• Create value for your agent so they deliver value for you (reciprocation) 

What is the main ethical concern in negotiations?

Lying

Why do people make unethical decisions? (Thomson, 2009)

They are unaware or unable to fully process ethical implications; bounded ethicality

“Spectrum of lies” in negotiations

(Active misrepresentation/sins of commission: actively making false statements of facts that misleads counterpart)

(Passive misrepresentation/sins of omission: don’t correct any wrong conclusions counterpart makes)

How could legal lies still be costly? (2 groups)

1. To the self

2. To the r/s

2 “costs” to the self:

1. Lies require mental energy

• Difficult to remember, especially elaborate lies

2. Makes you feel bad

• Identity conflict, guilt etc

“Costs” to r/s in two different nego cases:

1. In repeated nego:

• Opponents may seek revenge in the future

2. In one-shot nego:

• Develop a bad reputation (and you’ll never know which deals you missed out due to a bad rep)

Less willingness to negotiate again in the future can be merely due to:

Suspecting being lied to

Alternatives to lying about your BATNA

• Make improvements

• Highlight strengths, don’t discuss specifics

Alternatives to lying about your RP

• Divert their focus to interests and aspirations

• “That’s none of your business”

Alternatives to lying about facts

• Focus on uncertainty around facts

• Express your own opinion about facts 

What are the chances of people detecting lies?

Low chances

• People detect lies with 54% accuracy (= by chance)

• Law enforcement officials are no better, and psychologists and secret service agents slightly higher chance

What can you do if you suspect somebody is lying? (in general)

• Ask pointed questions (specific and probing)

• Ask the same questions in different ways → check for consistency

• Ask to recall activities not in order (this is difficult if made up)

• Detailed follow-ups

What can you do if you suspect somebody is lying? (2 methods in negotiations)

1. Use Contingency contracts 

• Hold opponent accountable

2. Use MESOs

• Will reveal their true preferences