Decision Making and Information Search in Multiple-Opponent Bargaining

Merrie Brucks, University of North Carolina
Paul H. Schurr, University of North Carolina
ABSTRACT - The purpose of this paper is to apply theories of information acquisition and choice heuristics to a situation where a buyer bargains with multiple sellers. Unlike the consumer buying situations that are commonly studied, bargaining presents a dilemma in which the buyer and seller share the psychological conflict between the need for information and self-imposed restraints against providing it. An examination of the bargaining literature and the consumer decision making literature yields interesting hypotheses concerning information acquisition and decision making in multiple-opponent bargaining tasks. The objectives of this paper are (1) to identify the nature of the research problem, (2) to indicate a relevant literature for possible solutions to theoretical questions, and (3) to suggest specific directions for new research efforts.
[ to cite ]:
Merrie Brucks and Paul H. Schurr (1985) ,"Decision Making and Information Search in Multiple-Opponent Bargaining", in NA - Advances in Consumer Research Volume 12, eds. Elizabeth C. Hirschman and Moris B. Holbrook, Provo, UT : Association for Consumer Research, Pages: 437-442.

Advances in Consumer Research Volume 12, 1985      Pages 437-442

DECISION MAKING AND INFORMATION SEARCH IN MULTIPLE-OPPONENT BARGAINING

Merrie Brucks, University of North Carolina

Paul H. Schurr, University of North Carolina

[The authors' names were arranged alphabetically. Both contributed equally to this paper.]

ABSTRACT -

The purpose of this paper is to apply theories of information acquisition and choice heuristics to a situation where a buyer bargains with multiple sellers. Unlike the consumer buying situations that are commonly studied, bargaining presents a dilemma in which the buyer and seller share the psychological conflict between the need for information and self-imposed restraints against providing it. An examination of the bargaining literature and the consumer decision making literature yields interesting hypotheses concerning information acquisition and decision making in multiple-opponent bargaining tasks. The objectives of this paper are (1) to identify the nature of the research problem, (2) to indicate a relevant literature for possible solutions to theoretical questions, and (3) to suggest specific directions for new research efforts.

INTRODUCTION

Very little is known about how individuals acquire information and make choices when they bargain with multiple parties. In marketing, this situation may occur when a consumer visits several dealerships when shopping for a new automobile or when an industrial buyer negotiates a new purchase with several alternative suppliers.

How individuals search for information and how that information is used (termed cue utilization) to make a decision are critical elements of the bargaining process. Information search and cue utilization have been widely researched in consumer decision making; however, buyer research literature has not investigated these processes in a bargaining situation. Yet bargaining is prevalent in major consumer purchases (e.g., automobiles and houses) and in a large number of industrial purchases. Thus, the goal of this paper is to suggest specific directions for future research on information search and cue utilization in multiple opponent bargaining, i.e., bargaining with more than one seller.

The paper is organized around four major topics. First, the nature and the importance of the research problem is developed. Then, relevant bargaining literature is discussed to frame what is known about bargaining situations involving multiple opponents and negotiable terms of agreement. Because the bargaining literature provides virtually no information about information acquisition and choice heuristics in situations where there are multiple opponents, attention then turns to the consumer decision making literature, which provides some insights into multiple-opponent bargaining. Last, specific directions for research on this topic are suggested.

INFORMATION SEARCH BEHAVIOR IN MULTIPLE-OPPONENT BARGAINING

The Research Problem

Interest in multiple opponent bargaining was initially motivated by the desire to gain a better understanding of organizational buying behavior. Early descriptive and conceptual work directed attention toward two kinds of information search: general search for an exchange partner and specific search for terms of agreement (Robinson, Faris, and Wind 1967; Wind 1968; Webster and Wind 1973). While descriptive studies continue to examine both kinds of information search (e.g., Vyas and Woodside 1984), experimental research has not simultaneously examined both kinds of information search. The current state of experimental research is illustrated by Crow, Olshavsky, and Summers' (1980) work in which search for a supplier was examined. This study represents a milestone in that verbal protocol analysis was used to develop a detailed understanding of the supplier selection decision process. Bargaining, however, was not considered in their study.

The bargaining literature has provided insight on how opposing parties come to terms of agreement. In marketing, these terms of agreement usually refer to attribute values for one or more products or services. Relatively little attention has been focused on decision processes in multiple-opponent bargaining, however. The multiple-opponent situation differs from the single-opponent situation in that the buyer must decide between alternative sellers, as well as come to terms of agreement on the product or service package.

The consumer decision making literature has focused on choice among several alternative brands, each offering a unique set of attribute values, where the attribute levels are fixed for a given alternative. Much attention has been devoted to identifying characteristics of information search and choice heuristics in this setting. Since both brand choice decisions and supplier decisions are examples of multi-attribute choice, it is suggested here that consumer decision making research may provide some initial insights into multiple-opponent buying behavior. The bargaining setting, by contrast, is characterized by attribute levels that are not fixed, but rather the subject of the negotiation.

The next section considers multiple opponent bargaining problem from the perspective of bargaining theory. Then, the following section will draw insights from the consumer search literature.

Single-Opponent Bargaining Theory

Bargaining is a form of joint problem solving that can be framed in terms of each party's "aspiration level" and "reservation level" (Tedeschi, Schlenker, and Bonoma 1973, p. 126). An aspiration level is the ideal level of attributes sought, and the reservation level is the attribute level at which no agreement becomes preferable to an agreement. The joint set of attribute levels that fall between each party's aspiration and reservation levels represents the "zone of agreement." If the zone of agreement is a null set, no agreement between the parties is possible.

The purposes of communication include a discovery function, which is designed to secure information about the other party's reservation level, and a manipulative function. The manipulative function aims at disguising the communicator's own preferences and values, while attempting to alter the aspiration level of the opponent (Tedeschi and Lindskold 1976). Thus, buyer-seller communications in a bargaining situation are mutually contingent in that each party is guided partly by internal stimuli, such as plans and attitudes, and partly by the other party and the situation.

Despite the mutual need for information from the other party, bargainers often avoid revealing information that might lead to exploitation by the other party (Kelley 1966). In Kelley's view (1966), this leads to two dilemmas. First, a bargainer has reason not to believe the communications of the other party, but at the same time must rely on the other party's communications in order to structure preferences and determine an effective bargaining posture. This paradox represents the "dilemma of trust." Second, a bargainer is motivated to be both frank and deceptive. Frankness provides information to the other party that enables joint movement toward agreement. Deception is necessary to avoid exploitation by the other party. This paradox is referred to by Kelley (1966) as the "dilemma of honesty and openness." These dilemmas point to the complex nature of information acquisition in bargaining.

Communications used to probe opponents' goals and priorities can be classified into one of three types: explicit, implicit, or heuristic trial and error. In explicit communication, bargainers exchange specific information about their situations or exchange information about the relative priority of different issues (c.f., Walton and McKersie 1965; Pruitt and Lewis 1975; Schulz and Pruitt 1978; Pruitt et al. 1978). Note, however, that the value of explicit information is reduced by the dilemmas described above.

Implicit cues and heuristic trial and error provide alternative approaches to acquiring information and seeking agreement. In implicit communication, bargainers exchange directional information about their priorities, compare alternative sees of offers, and in other ways indirectly convey information about their situation (e.g., Kimmel et al. 1980; Pruitt et al. 1978). Heuristic trial and error has two components (Pruitt 1981, p. 175-6). First, trial and error refers to communicating a variety of proposals in an attempt to discover mutual y acceptable terms of agreement. The other party's responses to these proposals presumably reveal something about the party's goals and priorities. Second, bargainers use heuristics for identifying proposals that maintain a target level of benefit. Thus, the set of proposals is not randomly selected.

The bargaining literature has emphasized the importance of implicit cues used by bargainers to infer information about an opponent's goals and priorities. For example, Cross (1969) proposed that bargainers infer expected rates of concession-making from the discrepancy between actual and expected rates of concession. Siegel and Fouraker (1960) proposed that an opponent's initial offer and rate of concession provide information about the opponent's aspiration level (i.e., goals and priorities). High opening offers signal high aspirations, and sudden, large concessions indicate willingness to yield. Subsequent bargaining strategy research has tended to support the original Siegel and Fouraker propositions, which are also predicted by Cross's mathematical motel.

Sometimes an alternative emerges that stands out in both parties' thinking as a fair and reasonable solution. Such an alternative has been termed a "mutually prominent alternative" (Schelling 1960). Pruitt (1981, p. 58-59) hypothesizes (and cites supporting empirical studies) that a mutually prominent alternative speeds concession making, enhances the likelihood that agreement will be reached, and narrows the range of agreements achieved. Thus, the presence of a mutually prominent alternative appears to reduce some of the complexities of the bargaining task.

By manipulating implicit indicators of goals and priorities, such as opening offers and concession rates, bargainers attempt to influence their opponents' perceptions of their goals and priorities. Influence is also more explicitly exerted through the use of threats and promises, selective withholding of information, and statements about positive or negative outcomes corresponding to different courses of action (Tedeschi, Schlenker, and Bonoma 1973). The process of influence is relevant to our understanding of search and cue utilization to the extent that influence-attempts decrease the value of information as a reliable indicator of feasible terms of agreement between a buyer and seller. Thus, information search and cue utilization are more complex in a bargaining situation than in a situation where attribute levels of the product offering are "fixed."

In summary, single-opponent bargaining theory focuses on the mutual dependence of bargainers and on the indeterminate nature of mutually acceptable terms of agreement. Because bargainers are dependent on each other for information yet have some opposing goals, they face the dilemma of trust and the dilemma of honesty and openness when exchanging information. As a consequence, communications serve the mixed purposes of disguising one's own position, influencing the other party's position, and finding mutually acceptable terms of agreement. Because explicit information may be unreliable in bargaining situations, information acquired through explicit information exchange is supplemented with or replaced by information acquired from implicit cues and heuristic trial and error search strategies.

Multiple-Opponent Bargaining

There are three fundamental issues in multiple-opponent bargaining. First, how do buyers decide upon the set of sellers with whom they will engage in prepurchase discussions and evaluations? Second, how to buyers negotiate mutually acceptable terms of agreement with alternative sellers? And third, how do buyers choose among alternative offers? Unfortunately, neither descriptive nor experimental research has shed much light on the second issue (e.g., Vyas and Woodside 1984; Crow, Olshavsky and Summers 1980). Although the Crow, Olshavsky, and Summers (1980) research regards the terms of agreement as fixed, not negotiable, this work merits attention for the way in which it experimentally addresses the first and third issues concerning how buyers choose suppliers for prepurchase deliberations and how buyers choose among offers.

Crow, Olshavsky, and Summers (1980) examined industrial buyer decision processes using protocol analysis and detailed decision simulation models. The buying task involved the purchase of five medium-cost electrical components. There were either 7 or 15 potential vendors, and the length of time allowed for delivery was either 9 or 5 weeks, which introduced time pressure. The first phase of the purchase task was to review separate vendor history profiles on 3 x 5 cards and select vendors from whom to request quotes. Then quotes containing prices and promised delivery dates were received; these terms of agreement were not negotiable. In the high time pressure condition the subject was required to select a final supplier for each component from those vendors submitting bids. In the low time pressure condition the subjects were permitted to sent out additional quote requests.

Similar to the findings in consumer decision making studies (Lussier and Olshavsky 1979; Payne 1976; Wright and Barbour 1977), organizational buyers were found to develop a two-staged decision process for quotation requests. Interestingly, no effects were found for time pressure or number of alternatives considered, two factors that are considered to increase task complexity and possibly lead to different search strategy. One explanation for the no-effect finding far these variables is that even the lower number of alternative vendors (i.e., 7) represents a high level of information load and task complexity.

The Crow, Olshavsky, and Summers study represents the state of the art with respect to experimental research on organizational buyer information acquisition and choice behavior. Note, however, that the offers of the suppliers are fixed and uninfluenced by the buyer's communications. Thus, the Crow et al. study provides information about multiple-brand search in an industrial setting, but does not address information acquisition in a bargaining situation.

Marketing experiments focusing on power relationships in a bargaining situation provide little additional information on the process of information acquisition and decision making, although insight is gained about the nature of outcomes (e.g., Walker 1971; Dwyer and Walker 1981). For example, Dwyer and Walker (1981) found that a manufacturer bargaining with two retailers obtained larger profits than a manufacturer bargaining with one retailer. This difference is attributable to the unbalanced power relationship that favors a manufacturer who faces two retailers competing for limited resources controlled by the manufacturer.

In summary, the topic of multiple-opponent bargaining is ripe for investigation. The only information we have in this area concerns interaction with one opponent where search concerns finding mutually satisfactory terms of agreement. Search among brands/suppliers has not been studied in a bargaining context. The next section discusses the consumer decision making literature as a possible source of ideas for the study of multiple-opponent bargaining situations.

CONSUMER DECISION MAKING AND INFORMATION SEARCH

Much research has been focused on how consumers make a choice among a set of alternative brands, each characterized by values on several attributes. This problem is analogous to the problem of choice among alternative suppliers (or sellers) in its multi-alternative, multi-attribute structure. In this section of the paper, relevant findings from this research stream are briefly reviewed.

Decision Making

Research has clearly demonstrated that humans are limited in their ability to process information (Miller 1956; Newell and Simon 1972). Thus, when making a choice among alternative products, people generally do not search for all available relevant information, even when the information is free and easily accessible. In addition, people appear to use heuristics, or rules of thumb, when they evaluate the information they do acquire, which further reduce the demands of the task. Much research has focused on identifying the heuristics people use, and how these heuristics are implemented (e.g., Russ 1971; Wright 1975; Payne 1976; Bettman and Zins 1977; Bettman and Park 1980).

Bettman (1979) proposed that choice heuristics can be characterized by three aspects: (1) whether or not a judgment is formed for each alternative as a direct consequence of using the heuristic, (2) what choice criterion is used to choose among alternatives, and (3) whether information is processed by brand or by attribute. Choice criterion refers to a rule such as "choose the best" or "pick the first one that is satisfactory." Processing information by brand refers to a strategy of evaluating each alternative as a whole, and then making a choice based on these overall evaluations. Processing information by attribute refers to a strategy of comparing all alternatives on a single attribute, followed by comparing the alternatives on a second attribute, and so on.

Consumers appear to use a phased strategy when the number of alternatives is relatively large (Payne 1976; Lussier and Olshavsky 1979). The first phase is used to eliminate some alternatives from consideration, and the second phase is used to compare the remaining alternatives with each other.

Consumers also appear to develop heuristics at the time of choice, using fragments or elements of rules stored in memory, rather than retrieving an entire decision procedure from memory and applying it in its entirety (Bettman and Zins 1977; Bettman and Park 1980). This implies that the choice situation may have a strong influence on the choice procedure.

Based on the notion that humans are limited in their information processing abilities, Slovic (1972) proposed a principle, termed concreteness, to describe a general information processing strategy used in judgment and choice. "Concreteness represents the general notion that a judge or decision maker tends to use only the information that is explicitly displayed in the stimulus object and will use it only in the form in which it is displayed. Information that has to be stored in memory, inferred from the explicit display, or transformed tends to be discounted or ignored (Slovic 1972, p. 14)." Although this principle has not been tested directly, empirical evidence has been found to support it (e.g., Slovic and Lichtenstein 1968; Payne and Braunstein 1971).

Information Search

Information search behavior is often characterized by the pattern of search, amount of search, and type of information sought (Jacoby, Chestnut, Weigl, and Fisher 1976). Pattern of search is thought to reveal choice heuristics, although it is an imperfect indicator. The amount of search and type of information sought are thought to be influenced by many individual and situational factors (Bettman 1979). Among these are: the buyer's knowledge, costs vs. benefits of information, time pressure, and choice task difficulty.

DIRECTIONS FOR FUTURE RESEARCH

In this section, findings from the consumer decision making literature are applied to the multiple opponent bargaining situation in an effort to provide insight into information search and evaluation processes in multiple opponent bargaining. Based on the literature reviewed in the preceding sections, several propositions regarding information search and evaluation processes in multiple opponent bargaining are stated and discussed. These propositions do not represent an exhaustive list of possible research questions on this topic. Rather, the propositions are meant to illustrate the direction such questions might take.

Phased Decision Making

When consumers make a choice among a large number of brands, they appear to use a two-phased decision process. First the brand alternatives are screened, and second, those alternatives that pass the "screen test" are further evaluated. The screening phase removes "inferior" brands from consideration early in the process, thus reducing the information processing demands of the choice task.

A two-phased decision process would likewise reduce task complexity in the multiple-opponent bargaining situation. When there are a large number of alternative exchange partners, these potential partners may first be screened on the basis of a limited number of attributes. Only those passing this test would be candidates for more extensive bargaining.

1. Bargainers use a two-phased strategy when the number of potential exchange partners is large.

The bargaining situation is far more complex than the consumer choice situations that have been studied previously. For example, the buyer must make inferences about the opponents' goals as well as keep track of attribute values. Thus, it is expected that in the second phase buyers will tend to bargain with one seller at a time; in order to reduce the demands on short term memory.

2. The second phase of the decision process is dominated by brand processing as opposed to attribute processing.

The pressure of a mutually prominent alternative is likely to reduce the complexity of the bargaining task with that exchange partner. As a consequence, the buyer may be able to divert some effort to bargaining with other suppliers.

3. The presence of a mutually prominent alternative enables the bargainer to expand search for an exchange partner.

Type of Information Utilized

Slovic's (1972) concreteness principal, which was discussed earlier as a principal derived from notions about limited information processing capabilities, leads to an interesting critique of Cross's (1969) theory. As described earlier, Cross's (1969) theory proposes that bargainers infer expected rates of concession-making from the discrepancy between actual and expected rates of concession. This model predicts some of the propositions offered in the widely accepted theory of Siegel and Fouraker (1960). These theories, however, were developed with a bilateral monopoly in mind. In a bilateral monopoly a bargainer faces a single opponent and perhaps can accommodate the more demanding cognitive task of comparing actual and expected rates of concession.

Slovic's concreteness principal suggests that bargainers are more likely to use concrete information. this might be particularly true in a complex choice task. Thus, contrary to the theories that propose the extensive use of rate-of-concession information as a basis for decisions, in a multiple-opponent bargaining situation bargainers may utilize offer level or concession size, rather than concession rate, as the basis for evaluating and comparing offers. Offer level information is most concrete, while actual/expected concession rate comparisons are least concrete.

4. As the number of potential exchange partners increases, a bargainer will increasingly rely on more concrete information, such as the offer-level proposed, rather than a comparison between actual and expected concession rates.

The increased reliance on offer-level information in multiple-opponent bargaining situations suggest another interesting proposition. Earlier we noted that research on bargaining strategy in single-opponent bargaining situations has supported Siegel and Fouraker's (1960) proposition that extreme initial offers convey high aspiration levels and reduce the opposing party's expectations about the final terms of agreement. Increased utilization of offer-level information in multiple-opponent bargaining also increases the salience of initial offers and thus make initial offers even more influential.

5. As the number of potential exchange partners increases, a bargainer will increasingly use the opponents' initial offers as the basis for a first-stage screening of alternative suppliers.

Last, the increased reliance on offer-level information in multiple-opponent bargaining also suggests that a bargainer will increasingly seek "final best offers" as the last step in bargaining. As illustrated by federal government procurement, a final best offer strategy may take the form of accepting sealed bids from numerous vendors on a given date and prohibiting negotiation after the deadline. Final best offers represent offer-level information conditioned on the unacceptability of any future offers. The utilization of final best offer information does not preclude bargaining prior to obtaining final best offers.

6. As the number of potential exchange partners increases, a bargainer will increasingly choose among suppliers based on a comparison of final best offers.

Information Exchange Strategy

Earlier discussion identified three different ways to identify mutually acceptable terms of agreement: explicit information exchange, implicit information exchange, and heuristic trial and error. Explicit information exchange involving unambiguous statements about goals, preferences for certain concessions, and preferences for specific terms of agreement puts less demand on the limited information processing capabilities of a bargainer than either implicit information exchange or heuristic trial and error. The latter two strategies represent indirect forms of communication. As such, a bargainer must convert perceptions of his or her own goals and priorities into an implicit form of communication or a trial proposal and interpret the opponents' responses, perhaps over a series of trials. Thus, a bargainer may opt for a less demanding information exchange strategy (i.e., explicit information exchange) when there are more alternatives to consider.

7. As the number of exchange partners increases, a bargainer will rely more on explicit information exchange as compared to implicit information exchange or heuristic trial and error.

One form of implicit information exchange centers around directional statements that convey some information about preferences for concessions and terms of agreement. Information of this kind differs from explicit information only by degree and will be employed before an implicit information exchange strategy involving a comparison of simultaneously presented offers, which yields information that requires a greater amount of interpretation. By the same token, a heuristic trial and error strategy that relies entirely on a heuristic for developing new proposals and disregards an opponent's response until agreement is reached puts less demand on a decision maker's information processing ability than does a heuristic trial and error strategy that takes into account patterns of responses. Considering that information search strategies may be differentiated according to the demands placed on limited information processing ability, a more general proposition may be stated.

8. Use of a particular information exchange strategy depends on the number of exchange partners actively considered. As the number of exchange partners increases, the greater the extent to which less demanding information search strategies will be utilized.

SUMMARY AND CONCLUSION

The purpose of this paper was to draw on the bargaining and consumer search literatures for insights to information acquisition and evaluation in a situation characterized by multiple-opponent bargaining. The bargaining literature has focused on search for acceptable terms of agreement, while the consumer decision making literature has focused on search for a preferred brand. A complete understanding of information acquisition in a bargaining setting requires consideration of both kinds of search simultaneously. Some directions for future research were suggested in the form of propositions, which were developed from the extant literature. An area that deserves considerable attention, but was not discussed in the paper, is that of methods for research. In this regard, an article by Schurr and Lessne (1983) provides a general discussion and guidelines for methods for conducting negotiation research in marketing. Also, Schurr and Ozanne (1984) have reported a study of multiple-opponent bargaining and thus provide some groundwork for multiple-opponent bargaining studies. Future research on this topic must devote attention to dependent measures that can adequately characterize information search in a bargaining situation.

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