Negotiation, Emotions, and Contingent Contracting Decisions

Despite decades of research on the subject, negotiation theory has proven unable to explain vital negotiation mistakes and complex contracting in reality. The existing behavioral negotiation model lacks proper forms of uncertainty and cannot well address the issue of contingent contracts. Recent negotiation research has started examining the psychological foundation of contingent contracting, but little is known regarding the impact of emotions on contingent contracting. Under uncertainty, economic behavior is largely driven by emotions. This dissertation systematically reviews the negotiation literature and empirically examines the impacts of anxiety and joy on contingent contracting decisions and social predictions in negotiations. By reformulating the way negotiations are being studied and examining the role of emotions in contingent contracting, I integrate negotiation theory with contract theory and provide important implications for such an integration.