The bullard houses negotiation case seller

Helping You Is Helping Me: Improving Students’ Ethical Behaviors in a Negotiation by Appealing to Ethical Egoism and the Reputation Effect Holly A. Schroth

Haas School of Business, University of California, Berkeley, CA, U.S.A.

The question of what constitutes ethical behavior often arises in a negotiation course. It is

difficult, if not impossible, for the instructor to define clearly what constitutes ethical and

unethical behaviors in negotiation conduct. In addition, the very term ‘‘ethics’’ may be

understood differently depending on the philosophical viewpoints of the instructor and/or

the students. This article focuses on how to improve ethical behaviors among students

engaged in a negotiation. Lewicki, Saunders, and Barry (2006) make a distinction between

what is ethical and what is prudent behavior in a negotiation. They define ethical as

‘‘appropriate,’’ determined by some standard of moral conduct and define prudent as

‘‘wise,’’ determined by the efficacy of the tactic and the consequences it may have on the

relationship with the other negotiator. I propose that in order to improve ethical behaviors

among student negotiators, the instructor should closely tie prudent and ethical behaviors

through the concepts of ‘‘ethical egoism’’ and the ‘‘reputation effect.’’

Ethical Egoism and the Reputation Effect

Although there is disagreement over whether it is possible to change the ethical view-

point of students after they enroll in college (Davis, 1994), I have found that students

Keywords

negotiation, ethics, ethical

egoism, reputation.

Correspondence

Holly A. Schroth, Haas School of

Business, 545 Student Services

Bldg. #1900, University of

California, Berkeley, CA 94720,

U.S.A.;

e-mail: schroth@haas.berkeley.edu.

Abstract

It can be a challenge to try to improve the ethical con-

duct of students enrolled in a negotiation course. Many

students believe that the best outcome is to maximize

value for themselves without regard for the interests of

the other party. Unethical negotiation behaviors often

result from a short-term perspective of the interaction

and myopic focus on maximizing self-gain. This article

suggests how instructors can improve ethical behaviors

among student negotiators by enhancing their long-term

perspective, appealing to students’ ethical egoism and

reinforcing the idea of the reputation effect.

Negotiation and Conflict Management Research

Volume 1, Number 4, Pages 389–407

ª 2008 International Association for Conflict Management and Wiley Periodicals, Inc. 389

can be trained in a negotiation class to engage in joint value-creating behaviors and to

resist exploiting the other party. This is achieved by emphasizing the long-term value

benefits students can gain by engaging in ethical behaviors. The term ‘‘ethical egoism’’

in this article refers to helping other people in order to help yourself (Rallapalli, Vitell,

& Barnes, 1998). In a negotiation situation, one ought to treat the other party well and

make sure the outcome is balanced because the process can have a positive impact on

one’s long-term self-interests such as future earnings and increasing clientele (see Lew-

icki et al., 2006, for a review). The reputation effect in this article refers to the impact

that impressions of a person’s past behaviors can have on the quality of their future

interactions (Glick & Croson, 2001). In their examination of the reputation effect in

negotiations, Tinsley, O’Connor, and Sullivan (2002) found that those who maintain

trustworthiness and reliability in a negotiation will enjoy repeated interactions and

maximized outcome potential.

The Relationship Between Ethical Behavior, Social Outcomes and Economic Outcomes

Much of the empirical negotiation literature has focused on negotiation outcomes as

being the product of an economically motivated transaction by rational strangers

engaged in a one-time encounter (for reviews, see Bazerman, Curhan, Moore, & Valley,

2000; Carnevale & Pruitt, 1992; Pruitt & Carnevale, 1993; Thompson, 1990). This focus

on economics neglects the countervailing view that both economic and social outcomes

need to be considered when evaluating negotiators’ success (Thompson, 1990). Eco-

nomic outcomes are generally thought to derive from the rational allocation of material

resources. Social outcomes are based on the subjective social and cognitive perceptions

held by negotiating parties following an encounter. Thompson argues that both out-

comes are important to include in comparative analyses of performance and that each

may influence the other.

Negotiators frequently have encounters that have both a history and future beyond

the immediate interaction, and the social outcome has great implications for the subse-

quent behavior of the negotiator (Oliver, Balakrishnan, & Barry, 1994). Negotiations in

the real world are iterative and occur among people who have histories (O’Connor,

Arnold, & Burris, 2005). The perceived ethicality of the behaviors of a negotiator may

impact not only the social outcomes of the negotiation but also the subsequent eco-

nomic outcomes. In order to better understand the relational dynamics between ethical

behavior, social outcomes, and economic outcomes, I will first discuss how unethical

and ethical behaviors may influence social outcomes. Then I will examine the impact

that social outcomes have on economic outcomes and how they may influence each

other.

There seems to be a basic tension in negotiation between claiming and creating value,

both important skills for negotiators to have (Lax & Sebenius, 1986). One consequences

of this tension may be that negotiators disregard the other party and engage in unethical

behaviors (Cohen, 2002). Reitz, Wall, and Love (1998) contend that unethical behaviors

in negotiation have four major social outcome costs that are often overlooked: rigidity

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390 Volume 1, Number 4, Pages 389–407

in future negotiations, a damaged relationship with the other side, a sullied reputation,

and lost opportunities for future interaction. Boles, Croson, and Murnighan (2000) also

found evidence that negotiators who perceive the other side as having acted unethically

are less likely to want a future interaction with the other party. Negotiators also view a

counterpart who acts unethically as less trustworthy (Boles et al., 2000; McCornack &

Levine, 1990) and are more likely to retaliate against the unethical party (Boles et al.,

2000; Schweitzer, Brodt, & Croson, 2002; Schweitzer, DeChurch, & Gibson, 2005). Using

unethical behaviors in a negotiation is also harmful to a negotiator’s long-term reputa-

tion (Schweitzer et al., 2005).

In contrast, ethical behaviors do not seem to impact social outcomes as strongly as

perceived unethical behaviors, but instead closely parallel some prudent negotiation

behaviors that may have a positive effect on increasing joint value (Lewicki et al., 2006).

For example, honest disclosure (against incentives to conceal) was found to increase the

other party’s willingness to share information and make concessions (Paese & Gilin,

2000). Negotiators, in response to honest disclosure, even in a distributive context,

made less demanding offers and were more truthful about their own alternatives to set-

tlement (Brodt, 1994). Feedback on ethical behavior can induce the negotiator to act

more cooperatively when given positive-ethicality feedback and act more honestly when

given negative-ethicality feedback allegedly solicited from the negotiation partner (Kim,

Diekmann, & Tenbrunsel, 2003).

Cohen (2002) maintains that ethical behaviors in a negotiation need not be self-sacri-

ficing and that such behavior can help prompt the other party’s cooperation. Negotia-

tors were found to be more receptive to reaching an agreement if they felt respected by

the other side. Additionally, those negotiators who treated others ethically were seen as

more effective by their peers. No evidence was found that treating the other party

respectfully resulted in any disadvantage in a negotiation. This is similar to evidence

and advice found in interactional justice literature (Bies & Moag, 1986). Negotiators are

more satisfied with outcomes if they feel that they were treated fairly than unfairly in

the process of reaching the agreement.

Curhan, Elfenbein, and Xu (2006) contend that social outcomes impact the economic

outcomes of a negotiation and that social outcomes are a better predictor of future

behaviors and intentions than economic outcomes. Their argument highlights the need

for students to be aware of the long-term consequences of behavior and to understand

that short-term ‘‘wins’’ may ultimately not really be wins at all if considered in light of

the potential negative long-term impact on future business and earnings. Unfortunately,

many business school students are myopic in their belief that any negotiation can be

considered as a single event without any linkage effects. Negotiators often begin a nego-

tiation by assuming a zero-sum game, i.e., one party’s gain is the other party’s loss

(Lax & Sebenius, 1986). It can be argued that there is no such thing as a win–lose

negotiation. If one side feels dissatisfied with the deal or interaction, then future negoti-

ations will be negatively affected, leading to a lose–lose situation (Barry & Oliver, 1996).

For the instructor trying to increase ethical behaviors in negotiation, it is a challenge to

help students realize that their own long-term interests lie in making sure the other

party is also satisfied. Appealing to students’ ethical egoism and reinforcing the reputa-

Schroth Improving Ethical Behaviors in Negotiation

Volume 1, Number 4, Pages 389–407 391

tion effect can help students understand that they could ultimately ‘‘lose’’ value even if

they are on the ‘‘win’’ side of the ‘‘win–lose’’ negotiation.

Loss of trust is one social consequence of unethical behavior that damages negoti-

ators’ ability to obtain good economic outcomes. Several studies have shown that

without trust, negotiators are unlikely to engage in problem-solving behaviors which

help bring about mutually beneficial solutions (Butler, 1999; Kimmel, Pruitt, Mage-

nau, Konar-Goldband, & Carnevale, 1980; Pruitt, 1981). There seems to be a strong

relationship between trust and the sharing of information. More information leads

to a good outcome and less information leads to a poor outcome (Butler, 1999;

Olekalns & Smith, 2005). Trust and satisfaction with the outcome are also instru-

mental for continuing sales relationships (Crosby, Evans, & Cowles, 1990). Gray

(1989) suggests that postnegotiation trust issues can undermine the implementation

of the terms of an agreement. The affective response associated with the satisfaction

or dissatisfaction of an outcome can influence compliance with the terms of the deal

(Oliver et al., 1994).

A second social outcome, reputation, is the impression (positive or negative) that

the negotiator leaves behind after the encounter (Lewicki et al., 2006). The negotia-

tors’ ethics can greatly affect their reputation (Ferris, Blas, Douglas, Kolodinsky, &

Treadway, 2005) which in turn can impact both joint and individual value gained in

a negotiation (Tinsley et al., 2002). For example, fair treatment is likely to result in

a good reputation, while unfair treatment is likely to lead to a poor reputation that

impacts the utility of the negotiated outcome (Lewicki et al., 2006). Research in

e-commerce has shown how critical a reputation can be for current and future busi-

ness (Zacharia, Moukas, & Maes, 2000). These authors define online reputation as

‘‘the amount of trust inspired by a particular person in a specific setting or domain

of interest. . . . It is regarded as asset creation and it is evaluated according to its

expected economic returns.’’ Online seller pricing strategies can be altered according

to the risk implied by the reputation values of their counterparts. If negotiators feel

that the other has acted fairly in the past, they will be more likely to trust the other

party, increasing the opportunity for maximizing joint outcomes (Brockner & Siegel,

1996). The term ‘‘competitive altruism’’ has been used to describe competition

amongst similar parties to be seen as more generous, with the goal of building a

positive reputation that leads to preferred interaction partner status, thus increasing

their long-term benefits (Hardy & Van Vugt, 2006).

Both loss of trust and reputation worsen negotiating relationships. This is especially

problematic in ongoing negotiations, where past interactions do impact future negotia-

tion behavior (O’Connor et al., 2005). People locked in an impasse on a prior negotia-

tion are more likely to reach an impasse in their next negotiation or to attain deals of

low joint value. If the strength of the negotiators’ relationship is poor, then economic

outcomes can also be negatively affected (Greenhalgh & Chapman, 1998; Valley, Neale,

& Mannix, 1995). A willingness to negotiate in the future with the other side is a critical

factor in ongoing relationships such as with a buyer-supplier (Eliashberg, La Tour, Ran-

gaswamy, & Stern, 1986; Roering, Slusher, & Schooler, 1975) and in e-commerce

exchanges (Zacharia et al., 2000).

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392 Volume 1, Number 4, Pages 389–407

Strategies for Negotiation Instructors to Help Improve Students’ Ethical Behaviors

The negotiation instructor can use several strategies to help students think about their

ethical behavior in a negotiation and the resulting implications on their long-term busi-

ness success. The different strategies are organized as follows: (a) self-reflection based

negotiation exercises, (b) partner-reactive feedback exercises, and (c) social cognition

discussion strategies. An underlying message for all of these strategies is the effect of

reputation and concern for the other party’s satisfaction on the negotiator’s long-term

success in business.

Self-Reflection Based Negotiation Exercises

The exercise ‘‘Bullard Houses’’1 (Karp et al., 2006) is helpful in persuading students to

reflect on the ethicality of their behavior in a negotiation. The exercise is designed such

that unless one party lies to the other or the other party does not look out for his or

her client’s interests, there should be no agreement. The best deal is no deal. A key les-

son of this exercise is that intentionally deceiving the other side will result in damage to

one’s reputation2 not only affecting implementation of the immediate outcome but also

the ability to continue to do business within their industry. In addition, if negotiators

accept a deal for their client that disregards their client’s interests, they have committed

an ethical violation.

Students who normally see themselves as ethical may feel disturbed at how easy it

was for them to lie to the other side. The exercise helps stimulate a discussion of what

constitutes a lie in a negotiation. Students will often disagree over whether misleading,

misrepresentation or lying by omission can be defined as a lie and whether the conse-

quences should be the same independent of the form that deception takes. Richard

Shell’s (1991) article ‘‘When Is It Legal to Lie in Negotiations?’’ provides a strong basis

for discussion of what is legal versus what is ethical in a negotiation. Appealing to those

students who feel they were lied to during the exercise will generate a strong discussion

of the importance of perceptions in defining lying behavior.

Participation in ‘‘Bullard Houses’’ or any other ethics-based exercises may not neces-

sarily lead participants to act more ethically in their future interactions, but it can give

them a framework for understanding and avoiding ethical traps. For example, discussion

can focus on strategies for detecting and managing deception. Drawing on research by

DePaulo, DePaulo, Tang, and Swaim (1989) provides the basis for examining how to

detect deception. Similarly, Schweitzer and Croson (1999) provide a solid foundation

1All negotiation exercises are available at The Dispute Resolution Research Center, Kellogg Graduate School

of Management, Northwestern University. 2Acting as agents in this negotiation, some students believe the reputation effect does not apply to them

because they are just a representative carrying out orders. Students need to be reminded that they still gar-

ner a reputation for the actions they choose to take and by the associations they choose to keep (including

a disreputable client).

Schroth Improving Ethical Behaviors in Negotiation

Volume 1, Number 4, Pages 389–407 393

for discussing the kinds of questions that can curtail deception in a negotiation and

other approaches for contending with deception. Students can increase their under-

standing of deception through discussion of how lying impacts on the person who tells

the lie (Festinger & Carlsmith, 1959; Taylor & Brown, 1988), including the threat to the

integrity of the individual and the reputation of the firm (Becker, 1998; Locke & Woice-

shyn, 1995). Discussion can also focus on the rationalizations a person may use to

justify lying and how these rationalizations may impact the lessons learned from such

ethics-based exercises (Aquino & Becker, 2005; Robinson & Kraatz, 1998; Sykes &

Matza, 1957).

Another self-reflective exercise in ethics, ‘‘Where’s Alvin? A Case of Lost Ethics’’

(Calonico, Inchausti, & Schroth, 2006), is a negotiation involving an ethical dilemma

between a manager and an employee who is also a close friend. The employee has stolen

company property. The situation is exacerbated because the manager had not obtained

a background security check on the friend, thus violating corporate hiring procedures.

The exercise illustrates how to manage ethical problems when personal stakes are high,

how ethics and power play a role in determining a problem’s outcome, and the impor-

tance of considering a relationship’s future before taking final action. Unlike ‘‘Bullard

Houses’’, the negotiators must come to an agreement and either party may choose to

act deceptively. In addition, the negotiators’ perceptions of power can tempt them to

use unethical behaviors to resolve the conflict. Students are asked to explore the bound-

aries of their own ethical behavior and analyze how their decisions might be influenced

by the ethical or unethical behaviors of others. In addition, an often raised question is

whether it is ethically acceptable to lie or deceive the other party in order to reach an

agreeable resolution to the case (means–end ethic). Unique to this ethics-based exercise

is the potential for outbursts of anger and other emotional displays. Emotions and their

impact on the decision to act ethically or unethically may also be explored. Similar to

the ‘‘Bullard Houses’’ exercise, many of the key lessons on ethical behavior in ‘‘Where’s

Alvin?’’ come from self-reflection upon debriefing the exercise. Many of the same ques-

tions regarding ethical behaviors used for the ‘‘Bullard Houses’’ debriefing may be used

with this exercise as well.

The ‘‘Newport Girl Doll Company’’ (Schroth et al., 2006), although a reflective-based

exercise, also focuses on corporate social responsibility and provides an excellent basis

for discussion of how short-term, but ill-gotten, gains may impact long-term success of

both the individual negotiator and the company. The exercise is a cross-functional team

negotiation that involves several department heads coming up with a strategic plan for

next year’s doll product line. Several ethical dilemmas face the team as well as a few of

the individual decision makers in this exercise. One ethical dilemma posed in the exer-

cise is whether to use an ingredient for the plastic material that is potentially harmful to

infants, but is much cheaper than the alternative. Another ethical dilemma is whether to

promote the doll as made in the U.S.A., although a large percentage of the product is

actually made in China. One member of the team must also decide whether to disclose

that he or she benefits from promoting the licensing of a particular celebrity for the

doll line. The instructor may also decide to introduce ‘‘news briefs’’ to one or more

department heads (different briefs for different departments). The briefs contain new

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information that could influence the decision of the team. It is up to those receiving the

‘‘news brief’’ to decide whether to disclose the contents that run counter to their per-

sonal interests in the negotiation. Finally, a key ethical decision must be made whether

to produce a ‘‘promiscuously’’ dressed line of dolls to compete with their main compet-

itor’s ‘‘Bratz’’ dolls which are supposedly designed for ‘‘tweens,’’ but typically marketed

to girls age 6 and up.

This exercise is particularly useful in discussing how decisions made for short-term

gains, ignoring ethical issues, may lead to long-term losses as a result of bad press and

negative customer reaction. Corporate social responsibility is a concern today for many

organizations which view a positive reputation as an asset to attract and retain excep-

tional personnel and grow their customer base (Reichheld, 2001). The instructor can

have students compare their experiences in the exercise with similar situations that com-

panies face in real life, especially focusing on the underlying ethical dilemma of meeting

the immediate financial pressures to ‘‘make the quarterly projections’’ versus the possi-

bility of the product or process causing harm to others. The instructor can ask if there

are ethical concerns with using inexpensive foreign labor (especially with a country that

has a poor track record for human rights) or allowing products to be produced in a fac-

tory that constantly violates safety standards (e.g., lead or cleanliness), and how this

may impact the company’s reputation and long-term success. It is also helpful to discuss

how companies can build a positive reputation. For example, Toyota has built a strong,

positive reputation for customer satisfaction and safety which was greatly enhanced

when the company launched a costly recall of its Lexus brand, giving VIP service to all

customers (e.g., on site fixes), despite immediate losses and embarrassment to the auto-

mobile manufacturer (being the first year of the model). Toyota continues to retain and

attract loyal customers who continue to buy the product.

The discovery of new information that may change the course of the team’s decisions,

but conflicts with the negotiator’s self-interest, also serves as a good point of discussion.

Questions regarding whether and when to disclose the new information add further

depth to the discussion. Similar to the other self-reflective exercises, debriefing can

revolve around the following topics: what is ethical versus what is not, and does it mat-

ter, what questions negotiators can ask to protect themselves from deceit, what informa-

tion is acceptable to conceal (Is a negotiator ethically obliged to reveal information that

could harm his or her self-interests?), and how may peer pressure have influenced the

ethical boundaries of the team members.

Counterpart-Reactive Feedback-Based Exercises

The ‘‘FG&T Tower’’ exercise (Goldberg, Galvin, & Brett, 2006) involves ‘‘shadow’’ nego-

tiations (prenegotiations that occur behind the scenes) before an important multi-party

meeting where decisions must be made by majority vote. It is useful to teach students

of negotiation the importance of shadow negotiating because it is a common occurrence

in business and can be fraught with unethical behaviors. The Kolb and Williams (2001)

article, ‘‘Breakthrough bargaining,’’ offers a good summary of the importance of shadow

negotiating. The article introduces the ‘‘strategic levers’’ (power moves, process moves

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Volume 1, Number 4, Pages 389–407 395

and appreciative moves) that a negotiator needs to consider for negotiating behind the

scenes. These strategic moves can ‘‘help to get stalled negotiations out of the dark of

unspoken power plays and into the light of true dialogue.’’

When negotiating outside of class (behind the scenes) in the ‘‘FG& T Tower’’ exer-

cise, students often focus on their own self-interests and lie to the other parties to per-

suade them to vote in favor of their own issues at the meeting that will take place

during the class period. The outcome of the voting subsequently leaves many students

feeling ‘‘backstabbed’’ because of outright lying and/or by the making of misleading

statements of intent. This exercise leads to a valuable discussion of the consequences of

short-term gain on the impact of the future relationship between the ‘‘company mem-

bers’’ and emphasizes the importance of the reputation effect, especially as a stigma for

the students who behaved deceptively.

The key lessons from this exercise are derived mainly from the team’s self-debrief-

ing where they give each other feedback regarding the strategies and tactics that they

felt were effective and ineffective in influencing the different team members and out-

come of the vote. The debriefing also focuses on the consequences of the students’

actions for their future relationships. Those who felt ‘‘duped’’ vow never again to

trust or work with the accused party. Students accused of the deceptive behavior may

justify their behaviors or deny wrongdoing, further increasing tensions. The typical

feedback from peers reinforces the idea that, although negotiators are interested in

achieving maximum gains for themselves, they must consider the ramifications of their

actions on others, especially in this case their colleagues. To dupe or lie to the other

party ultimately will not serve their own interests, especially given that they have to

continue to work with them and there is a realistic threat of retaliation or revenge

(Tripp & Bies, 1997). The ‘‘FG&T Tower’’ exercise can also help students to reflect critically on how they feel when they have been accused of deceptive behavior or are

the victim of deceptive behavior. In addition, this exercise can foster discussion

regarding how to identify behaviors that negotiators may exhibit when they are not

being fully truthful, how to ask questions to uncover deception, how a reputation can

be built quickly and impact subsequent negotiations, the danger of overly focusing on

self-interests to the detriment of working relationships, the effects of rationalizing self-

ish behaviors, and the role of emotions in the satisfaction of negotiated outcomes and

future interactions.

An additional ethics lesson may be of value immediately after debriefing the ‘‘FG&T

Tower’’ exercise. The instructor may give students a distributive exercise in which there

is only one issue to negotiate and the parties will not expect to work together again.

The purpose is to determine if students can apply the lessons of the reputation effect in

the earlier exercise in a different context where it is tempting to seize upon short-term

gains. Some students demonstrate that they learned the earlier lesson and are proud of

themselves for not engaging in deceptive behaviors, gambits, or other pressure tactics in

the process of negotiating a deal. Other students continue to engage in behaviors to

maximize individual gain at the expense of the other party’s satisfaction with the out-

come and process. Those who act in their own self-interests without regard for the other

side are reprimanded by their fellow classmates. For many students this is a crucial

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turning point as they realize it is in their self-interest to make certain that the other side is

satisfied and that maximum gains should be viewed on a long-term scale rather than a

one-shot deal.

Most instructors of negotiation ask students to record their negotiated outcomes on

the board for everyone to see. After the first negotiation debriefing with the class, stu-

dents often acquire a reputation based on both the perceived fairness of the outcome

(defined as whether it is balanced or imbalanced) and the quality of the process (defined

as how easy or strained the interaction was in terms of sharing information and prob-

lem solving). The instructor should emphasize that future interactions with other stu-

dents may be affected if a person is given a negative image (the reputation effect). The

Reputation Index3 is a peer assessment exercise that gives students an indication as to

whether classmates have a positive or negative impression of them. Research has found

that being labeled with a negative reputation causes the other party in a negotiation to

engage in defensive tactics, such as extreme anchoring and minimal information sharing,

which reduces potential gains for both (see Tinsley et al., 2002). This attack and defense

spiral leads to further poor outcomes and diminishes the ability of the person with the

initially poor reputation to change those perceptions. The goal of the Reputation Index

is for students to understand the effects of their behaviors in the negotiation class on

other students’ attitudes toward them. It is a quantitative and qualitative measure that

gives rich feedback to participants. There are several variations of the exercise, but all

require that students evaluate classmates’ reputations (good or poor) and provide an

explanation for the rating. A sample Reputation Index and instructions appear in Appen-

dix A. All students receive a Reputation Index score,4 the number of students who com-

mented about them,5 comparison means for the class, and a written report of the

comments (identities of the writers are withheld). The comments help illustrate what

leads to a good reputation or a poor reputation. Verbatim comments made about two

students with an extremely poor reputation and two with an extremely positive reputa-

tion appear in Appendix B. The comments may appear redundant, but were made by

several different students, thus reinforcing the value of the feedback as being consistent.

It is important for an instructor to take the time to discuss the feedback with stu-

dents and to suggest how they can improve their future negotiation interactions. The

reputation index can help the students learn what behaviors are perceived by their part-

ner as either helpful or harmful to a negotiator’s reputation. For example, behaviors that

can help build a strong, positive reputation include being well prepared, spending time

3Roy Lewicki was instrumental in introducing me to the concept of using a reputation index in the class-

room. 4In accordance with the sample reputation index, those who had direct positive experience receive a +2

score, an indirect positive experience receive a +1, a direct negative experience receives a )2, and an indirect negative experience a )1. 5It is helpful for students to know how many people have commented on them so they can see how much

of an impact they have had on their classmates. Those students who were commented on by several others

did have an impact (positive or negative) on their peers whereas those who received a few or no comments

did not have an impact on their peers and need to examine why this is the case. They need to reflect on

how they can have a greater impact on their peers, especially to build a strong positive reputation.

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Volume 1, Number 4, Pages 389–407 397

sharing information and asking questions, being concerned with the others’ interests

and working for common good, taking time to build a relationship, and acting in a sin-

cere, open, and honest manner. Those behaviors viewed negatively include acting

aggressively or competitively, ignoring the interests and needs of the other side, acting

stubbornly and refusing to make concessions, using gambits, acting dishonestly, and

being unprepared. Discussion can also revolve around how reputations are built,

whether it is possible to change a person’s reputation, what may destroy a previously

good reputation, and how a person’s reputation may affect a negotiation encounter.

Even with a good track record, one poorly executed negotiation can impact future nego-

tiations if the other party feels victimized and is highly vocal in telling others (Anderson

& Shirako, 2007).

Instructors can use the Reputation Index at the end of the course as a surprise assess-

ment and feedback tool or as a part of the students’ grade both midway through the

course and at the end. If the goal is to encourage students to try different tactics with-

out the specter of experimentation hurting their course grade, the instructor should not

grade students on their reputation score. Learning may be increased for all students if

they are encouraged to try different tactics and to discover for themselves and through

discussion the consequences of their actions. Some instructors evaluate trustworthiness

and reputation by having students give each other a score from 1 = poor to 10 = excel-

lent on these dimensions after each exercise, but do not include the scores as part of the

students’ grade. This tool can give students instant feedback which could be helpful in

encouraging ethical behavior. Regardless of how the instructor chooses to use the repu-

tation index, it is a powerful feedback tool for students to understand what behaviors

are seen as positive or negative by their negotiation counterparts. Students will be better

able to recognize if they need additional development of their negotiation skill set.

To further demonstrate the reputation effect and its consequences, the instructor can

conduct an inter-class negotiation between students in an MBA negotiation class and

undergraduate negotiation class, or any two negotiation classes (regardless of whether

they are with the same instructor or within the same school, business or law). The les-

sons are twofold. First, students must research the reputation of their paired partner to

prepare well for the exercise. Second, in the debriefing, students must reveal what they

have learned about their partner’s reputation and how this altered their negotiation

strategy and implementation of tactics. The discussion is often quite illuminating to stu-

dents. Some are upset to learn of their reputation while others are quite pleased. Those

pairs who enjoy positive reputations have a very satisfying relationship and often maxi-

mize joint gain, whereas those with negative reputations have a very strained negotiation

that often leads to impasse or low joint value creation. The result of the exercise is a

strong lesson that there is no such thing as a one-shot deal and that a person’s reputa-

tion precedes them in business.

Social Cognition Strategies

Social cognition entails how people think about social situations. According to Fiske

and Taylor (1991), people’s cognitions help determine what they will do and which

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direction their behavior will take in a social interaction. Moscowitz (2005) suggests that

changing the way people think about their social interactions may cause them to change

their behaviors. The following are ideas to help students think differently about their

ethics in a negotiation, and will hopefully have a positive impact on their subsequent

choice of behaviors. These approaches are intended to either reinforce the reputation

effect or appeal to the students’ ethical egoism.

Cognitive Distraction Theory—The Value of Being Upfront About Ethical Issues

People have limited information processing capacity and experience reduced processing

capability when required to pay attention to more than one task (Baddeley, Chincotta,

& Adlam, 2001). A distracted person is less able to engage in issue-relevant thinking

(Harkins & Petty, 1981). In a negotiation, if attentional resources are drawn away from

the key issues of concern, the negotiator may not adequately process all the relevant

information in the situation, resulting in poor decisions and unsatisfactory outcomes.

In data that I have collected over the past 3 years, I found that when I give students

(MBA and undergraduates) their own ethical issue to grapple with during a negotiation,

they are much less attentive to the other side’s unethical behavior (in this case lying and

misleading behaviors). For example, in the ‘‘Bullard Houses’’ exercise where one side is

hiding information in order to secure a deal, 52% of students were able to recognize no

deal was the best deal (sample size of 221). However, when I added a minor ethical issue

to the other side (e.g., the possibility of leaky septic tanks under the property), 89% of

students (sample size of 346) made a deal. Students who were struggling with whether to

reveal their own ethical issue, although minor, were much less attentive to the deceptive

behaviors of the other party. Those students failed to see that their questions were not

being answered clearly and/or that the other side was inconsistent or evasive in answering

their questions. In contrast, students without their own ethical issues were able to pick

up more easily on inconsistent behaviors and deceptive answers given by the other side,

leading them to walk away from the deal. Interestingly, those students who brought up

their own minor ethical dilemma early in the negotiation were more likely to walk away

than those who never disclosed or disclosed late in the negotiation. The instructor of

negotiations can illustrate to students that when they are distracted by their own ethical

issues, they can suffer from a lack of focus and cognitive processing ability which reduces

their own ability to satisfactorily evaluate the behavior of the other side.

Social Networking Theory—Six Degrees of Separation

Technology continues to make the world increasingly interconnected. Some believe,

based on Milgram, 1967 ‘‘small world’’ studies, that there are six degrees of separation

between people. This idea led to the creation of the popular game ‘‘Six Degrees of Kevin

Bacon’’ and is also the foundation of social and business networking websites such as

Facebook, MySpace, and LinkedIn. It is a common practice among recruiters to ‘‘Google’’

potential employees to learn more about them. There have been newspaper stories about

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employees being fired for what they had posted on their blog or MySpace page. ‘‘Trust’’

networks such as Spock and Rapleaf are becoming more popular as a method of hiring

employees and services because the recommender ‘‘trusts’’ that person. It is important

for students to understand that the content of their postings can impact their reputation

and that there is an incentive to engage in ethical behaviors to prevent others from

posting information about them that may be harmful to their future business encoun-

ters and opportunities (Neufeld, 2007). I recommend to my clients that they ‘‘Google’’

people with whom they will negotiate to help them prepare for the encounter. A tre-

mendous amount of information about people can be learned this way. Students should

be reminded that the Internet exponentially increases the reputation effect.

Students of negotiation often respond well to personal experiences of people who

have succeeded or failed because of their negotiation tactics. The instructor can ask stu-

dents whether they have stories where they have taken advantage of a person thinking

that they would never see them again and then to their surprise meet them years later.

Students can also be asked to share experiences when they took advantage of a person

and any negative consequences that resulted. Students may also describe how they felt

and reacted when someone took advantage of them. Business students often tell stories

of how their companies increase rates for certain clients who are known to be ‘‘difficult’’

(e.g., most often described as a distributive negotiator) to allow them to negotiate a ‘‘lit-

tle something off.’’ The result—clients with a poor reputation pay a premium over oth-

ers even though they are ‘‘negotiating’’ a discount. Guest speakers who describe their

experiences with short-term versus long-term gains can also emphasize the importance

of reputation in the real world.

It takes a long time to build a good reputation, but a single incident can quickly

destroy one. It is not uncommon for my students to refuse to work on a team with

another person who they felt took advantage of them in a negotiation exercise. Further-

more, many students have contacted me, years after graduating, to tell me that they

refuse to do business with, or to hire, a former classmate because they remember how

the classmate took advantage of them or others in the negotiation class. I tell my classes

these stories to reinforce the reputation effect. Ethical behaviors in the classroom impact

not only interactions with classmates at school, but also interactions outside the class-

room, including their future business interactions.

Changing Mindsets: Taking the Allure Out of Using Gambits

A person’s mindset is composed of their beliefs about themselves and their interactions;

changing these beliefs can have profound effects on their actions (Dweck, 2006). Mind-

sets can influence subsequent information processing (Higgins & Chaires, 1980). Several

different mindsets can affect judgments (Moscowitz, 2005). Many negotiation students

are fascinated with gambits (negotiation tactics that achieve gains in the short term but

damage the long-term relationship) but just as many feel these tactics constitute unethi-

cal behavior. Some of the more common gambits are good cop/bad cop, limited author-

ity, nibble, and red herring. It is not uncommon for students to use gambits in business

and believe that the tactics are successful because they ‘‘won’’ as a result of using gam-

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bits. The problem in the use of gambits is the lack of immediate, bad consequences.

The effects are only felt much later. Therefore, the challenge is to try to change the stu-

dents’ mindset away from gambits being a successful strategy for long-term success.

Some authors of popular trade books and articles on negotiation promote gambits

for ‘‘negotiating success.’’ Gambits are attractive to a reader because they are easy to

understand and implement. However, there is little discussion of the long-term negative

repercussions of imbalanced deals and/or the use of tactics that irritate or frustrate the

other side. Students of negotiation must face the consequences in a timely manner to

increase the likelihood that more ethical behaviors will occur (Kim et al., 2003). In class

debriefing, some students admit proudly to using gambits. Their negotiation partners

should then be called upon to discuss their inevitably negative reactions to the gambit.

Immediate, negative feedback from classmates may help students realize that the quick

gain from a gambit can hurt not only their reputation, but chances for long-term bene-

fits. It is also helpful for the instructor to ask students who use gambits if they could

have achieved the same outcome in a more collaborative way. Many students will reflect

on this and conclude that they did not need to use the gambits because the gambits

actually set back the negotiation at points. One last lesson that can appeal to students’

ethical egoism is for the instructor to show students that, when caught using a gambit

(such as having the other side identify and call out the good/cop bad cop strategy), they

lose credibility and power in the negotiation. This lesson can be reinforced when class-

mates give their perceptions of the interaction.

Conclusion

There are many strategies that the instructor can employ to increase the ethical behav-

iors of students in a negotiation course. This article advocates appealing to students’

ethical egoism; it is in the students’ self-interest as a negotiator to be concerned about

satisfying the interests of the other side. This article also asserts that utilizing the reputa-

tion effect as part of ethical egoism can enhance negotiators’ use of ethical behaviors.

Both ethical egoism and the reputation effect can be used to help students increase their

long-term versus short-term perspective on negotiation strategic thinking.

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