Economics Insights @ CBS

This article focuses on the role of threats in negotiations. Broadly speaking, a threat is a proposition that issues demands and warns of the costs of noncompliance. Even if neither party resorts to them, potential threats shadow most negotiations. Researchers have found that people actually evaluate their counterparts more favorably when they combine promises with threats rather than extend promises alone. Whereas promises encourage exploitation, the threat of punishment motivates cooperation.

Recommendations often play a positive role in the decision process by reducing the difficulty associated with choosing between options. However, in certain circumstances recommendations play a less positive and more undesirable role from the perspectives of both the recommending agent or agency and the person receiving the recommendation. Across a series of four studies, we explore consumer response when recommendations by experts and intelligent agents contradict the consumer's initial impressions of choice options.