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Perceptions of Fairness in Negotiation


Nancy A. Welsh

Editors’ Note: In all of negotiation there is no bigger trap than “fairness.” Welsh explains why: among multiple models of fairness, people tend to believe that the one that applies here is the one that happens to favor them. This often creates a bitter element in negotiation, as each party proceeds from the unexamined assumption that its standpoint is the truly fair one. Welsh argues that for a negotiation to end well, it is imperative for both parties to assess the fairness of their own proposals from multiple points of view, not just their instinctive one—and to consider the fairness of their procedures as well as of their substantive proposals. 

Introduction 
Generally, when people negotiate, they prefer to win. At the very least, they work to achieve outcomes they view as sufficiently “fair.” This concern for fairness can lead to apparently irrational behaviors in negotiation. We all know people (including ourselves) who have offered more than was necessary or rejected offers even though they made economic sense. Such actions, which have been replicated by researchers in experiments involving “ultimatum games”1 can be explained by examining negotiators’ perceptions of fairness (Bazerman and Neale 1995; Oswald and Zizzo 2001; Fehr and Gatcher 2002; Brosnan and de Waal 2003; Pilluta and Murnighan 2003). Negotiators tend to assess distributive and procedural fairness in making offers and demands, reacting to the offers and demands of others, and deciding whether to reach an agreement or end negotiations. Because fairness perceptions are so significant in understanding people’s negotiating behaviors, this essay will examine briefly the criteria that undergird differing fairness judgments—both distributive and procedural—and the social, psychological and cognitive variables that influence people’s perceptions of fairness.

Distributive Fairness Perceptions
The concept of distributive fairness focuses on the criteria that people use (often quite unconsciously) to judge whether they have received their “fair share”—i.e., that the outcome of a negotiation or other decision making process is fair. People often disagree regarding the most appropriate criteria to be applied in determining whether an outcome is fair. As is obvious from reading judicial opinions in appellate cases, even impartial and educated people can review the identical record and reach widely disparate, yet equally principled, conclusions regarding what constitutes a fair result. The definition of distributive fairness is, therefore, inevitably influenced by subjectivity. This realization leads to the following questions: What is the range of criteria that people—including negotiators—use to guide their judgments regarding distributive fairness? What variables influence people’s selection among the different criteria? Last, why do people find it difficult to reach agreement even when they agree that they should use the principle of equitable distribution to arrive at an outcome?

Competing Criteria for Judging Distributive Fairness
The various criteria for judging distributive (or outcome) fairness can be distilled into four basic, competing principles or rules—equality, need, generosity, and equity. The equality principle provides that everyone in a group should share its benefits equally. According to the need principle, “those who need more of a benefit should get more than those who need it less” (Deutsch 2000: 45). The generosity principle decrees that one person’s outcome should not exceed the outcomes achieved by others. Finally, the equity principle ties the distribution of benefits to people’s relative contributions. Those who have contributed more should receive more than those who have contributed less. The closer that the actual outcome of a negotiation is to the outcome a negotiator anticipated, based on the application of her favored principle, the greater the likelihood that the negotiator will perceive the outcome as fair (Lind 1989; Bazerman and Neale 1995; Wissler 1995; Guthrie and Levin 1998).2 

Imagine the application of the four principles described above to a negotiation between two individuals who are establishing a joint venture and negotiating the distribution of income. The first negotiator, who has little capital, is contributing the idea and the time and energy to imple...
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