Why Do Business Losses Cause Conflict?

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Abstract

Evidence suggests that conflicts between contracting parties are more prone to occur when a party has suffered a significant loss. It is argued that the phenomenon is difficult to understand within conventional contract theory, which assumes full rationality, while behavioral theories based on the concepts of motivated reasoning and reciprocity provide interesting explanations. Thus, losses can trigger motivated, self-serving perceptions and beliefs, which in turn are likely to induce negative reciprocity as well as counter-productive acts aimed at bolstering self-image. These explanations are demonstrated to be well supported by experiments
Original languageEnglish
JournalJournal of Strategic Contracting and Negotiation
Number of pages14
ISSN2055-5636
DOIs
Publication statusPublished - 1 Jun 2020

Bibliographical note

Epub ahead of print. Published online: 1. June

Keywords

  • Cause of conflict
  • Reciprocity
  • Loss fame
  • Behavioral economics
  • Theoretical perspectives

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