Now that it is job hunting season, which it has been for a while for most students, my assumption is that it’s not only hard to find good opportunities in the current economy, but even more difficult to negotiate on good pay terms once opportunities are found. The reason is when the potential employee has a very low BATNA (Best alternative to negotiated agreement), the employer can indeed push terms favorable to him forcefully.
In analyzing this situation, I concluded that it is more beneficial to be irrational rather than rational… For example, let’s say X’s aspiration base is $ 300,000 (Yes, I know that’s an outrageous aspiration aka investment bankers’ aspiration… hehe) and his base expectation is $ 200,000 (I think I should remember what one of the investment banks told students a few months back – that they plan to hire 1 employee from Belgium!).
Any case, X finds and is chosen for an opportunity in company Y and it can afford to pay $ 250,000 and yet Y, given the current situation, only offers $ 150,000. Now let’s say X’s next best opportunity is a job at Z (not as desirable as Y’s offer) and pays only $ 100,000. What should X do?!
The rational choice in this case might appear to be that X must accept Y’s offer of $ 150,000 while knowing fully that he deserves the $ 250,000 that Y can afford to pay. Yet, I believe it might also be rational to accept Z’s offer and reject Y!
X has a very weak BATNA. In this case, it appears to me that one of the rational choices is to be irrational and not accept Y’s offer hoping that Y will not have a better BATNA either and therefore will offer to pay at least $ 200,000 which is X’s base aspiration! Of course, this depends upon what is Y’s BATNA… but the bottom line is when you have nothing to negotiate with, irrationality might be the only affordable tactic :) I guess this is the basis of the Chicken game… but interesting to think which kind of applicants would have enough courage to play that game.