Advanced negotiation: does holding a right change its value?
In negotiations over licensing or logistics capacity, each party may regard its valuation as entirely objective. The managerial question is more precise: would we ask as much to relinquish a right as we would be willing to pay to acquire it?
What the literature establishes
Daniel Kahneman, Jack L. Knetsch and Richard H. Thaler (1990, Journal of Political Economy) showed experimentally that allocating a good can create a gap between the amount demanded to give it up and the amount offered to acquire it. In their experiments involving consumer goods, fewer trades occurred than an analysis assuming ownership-independent valuations would predict. Holding an asset is therefore not necessarily neutral in its valuation.
The mechanism: giving something up can mean losing
Daniel Kahneman, Jack L. Knetsch and Richard H. Thaler (1991, Journal of Economic Perspectives) connect the endowment effect, loss aversion and status quo bias in a review article. Giving something up may be evaluated as a loss relative to the current situation, whereas the corresponding acquisition is considered a gain. This interpretation provides one possible mechanism behind disagreement, without establishing that it accounts for every buyer–seller valuation gap.
The premature conclusion
One might conclude that a demanding seller necessarily overvalues what they hold. That would confuse an experimental effect with an individual diagnosis: relinquishing a right can entail genuine replacement costs, contractual constraints or a loss of flexibility. The useful question is what explains the valuation gap, not whether the other party should be labelled irrational. (our executive and employee training programmes)
What the evidence does not allow us to transfer
The experiments cited do not directly concern pharmaceutical licences, Rhine transport slots or access rights to international R&D results. These assets combine uncertainty, complementarities and obligations that the experimental goods do not reproduce. The research supports checking the consistency of valuations, but neither a universal overvaluation factor nor an automatic discount.
A practical check in Bâle
Within SHR’s “Advanced Negotiation” programme, one possible application in Basel would be to select a precisely defined right in a pharmaceutical, life sciences, Rhine logistics or international R&D negotiation. Before discussions with the partner, two internal assessors working independently would use the same information to estimate, respectively, the maximum acquisition price and the minimum relinquishment price, explicitly identifying the costs specific to each position. The measure would be the gap between these amounts, accompanied by a record of documented justifications and assumptions still requiring verification. This check would not prove an endowment effect; it would make a divergence visible before it becomes a red line. To go further: explore the Advanced Negotiation training in Basel in the canton of Basel-Stadt, or browse our executive and employee training programmes in Switzerland.
In pictures: Advanced Negotiation in Basel
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