Judgment Accuracy and Outcomes in Negotiation: A Causal Modeling Analysis of Decision-Aiding Effects

This study examines how interaction structure (no formal structure versus modified Nominal Group Technique) and communication channels (face-to-face versus computer-mediated) affect negotiation performance by changing negotiation judgment accuracy. Participants assumed the role of a selling division manager or one of two buying division managers and completed an intra-organizational transfer pricing negotiation task in groups of three members each. In half of all groups, members interacted freely without any formal structure; in the other half, members interacted using a two-step, modified Nominal Group Technique. Within each of these two conditions, half the groups met directly and communicated face-to-face; in the other half, members were physically isolated and communicated with the aid of a simultaneous electronic-messaging facility. Results showed that unstructured groups and computer-mediated groups had lower judgment accuracy, obtained lower outcomes, and distributed resources more unequally than structured groups and face-to-face groups, respectively. Further analyses using causal modeling revealed that judgment accuracy played a significant role in determining negotiation outcomes. Specifically, negotiation structure caused increases in both individual and group profits and decreases in inequality of resource distribution by reducing fixed-sum error. Computer-mediated communication increased both fixed-sum error and incompatibility error and these increases explained the effects of communication medium on resource distribution. However, changes in fixed-sum error only partially explained the effects of communication medium on individual and group profits. Changes in incompatibility error did not explain any of the effects of communication medium on profits. These results are discussed in terms of implications for the design and implementation of decision aids for small group negotiation.