The Contrast Principle in Negotiations
Article by Omid G
The Psychology of Negotiation: Understanding the Contrast Principle
By Omid G. | “The Godfather of Negotiation Planning”, Intel Corp
There is a tremendous amount of psychology involved in negotiations. Among the most powerful—and frequently overlooked—principles is the Contrast Principle. Allow me to illustrate with a personal story.
A Personal Example: Real Estate and Perceived Costs
I’m currently in the market to purchase a home in coastal San Diego. To facilitate this, I’m also selling my existing property in Northern California. As part of this transition, I’m incurring substantial expenses:
Loss of rental income due to the tenant vacating early
Landscaping renovation
Multiple inspections by licensed specialists
Professional staging (temporary interior furnishing for showings)
These alone amount to over USD $20,000. Once you include realtor commissions and closing costs, the total exceeds USD $130,000.
While discussing this with my cousin, I expressed frustration about the magnitude of these costs. His response was:
“Yes, but those expenses are nothing compared to what you will get in net proceeds from the sale of the home.”
His statement reflected a comparison-based judgment—an instinctive use of the Contrast Principle—but in this context, it was a critical negotiation error.
What Is the Contrast Principle?
The Contrast Principle states that we tend to assess the value or cost of an asset in comparison to other circumstances, rather than evaluating it in isolation. Our interpretation is framed by the contrast—not the objective value.
Numerous studies have validated this principle, revealing how often our behaviors in decision-making are irrational once dissected. In my case, $130,000 seemed justifiable only when compared to the net proceeds from the house sale. However, if I objectively evaluate what goods and services I am receiving for that amount—it could very well be an overpayment.
Hypothetically, if I were earning triple the proceeds from the sale, then $130,000 would feel negligible. Yet, the services and costs are identical. This shift in perception highlights the core flaw: we allow context to override judgment.
The Car Buying Analogy
Let’s explore this with a familiar example:
Base Model: $30,000
Mid-tier Model: $35,000
Top-tier Model: $40,000
If you initially planned to buy the base model and are then offered the mid-tier version for “just $5,000 more,” it feels reasonable.
Now imagine:
Base Model: $50,000
Mid-tier: $55,000
Top-tier: $60,000
That same $5,000 or even $10,000 feels easier to justify. Conversely, if the base model were $15,000, those same upgrade costs would feel far more significant.
What changed? Not the features, but your point of comparison. The value of the $5K or $10K upgrade is being judged based on how much you're already spending—not what you're receiving in return. And this is the heart of the Contrast Principle in negotiations.
Why This Is a Mistake
This line of reasoning leads to poor decisions. In negotiations, the focus must always be on the absolute value of what you are getting in exchange for what you are giving—not relative to what you’ve already committed.
You can rationalize all day long that “since I’m already spending $X, I might as well spend a little more,” but that’s faulty thinking. What matters is the value of the additional amount, not its size in comparison to the total.
Applying the Contrast Principle Strategically
So, how do you leverage this principle in negotiations? The strategy is simple—and highly effective.
Always pair your smaller negotiation demands with your larger ones.
When small asks are presented alongside larger demands, they are perceived as trivial in comparison. The other party is more likely to concede without resistance.
However, when those same small requests are presented in isolation, they are judged solely on their standalone merit—and may be challenged or rejected.
The lesson? Structure your negotiation offers wisely. The presentation sequence directly impacts how the other party evaluates your requests.
This tactic isn’t manipulative. It’s not deceptive or unethical. It’s simply aligned with how our cognitive systems process information and contrast. And when you recognize this, you become far more effective as a negotiator—and less vulnerable to these same tactics when used by others.
Final Thoughts
Understanding and applying the Contrast Principle can drastically improve your negotiation outcomes. Add it to your negotiation toolkit and make purposeful use of it.
Now go out there and do something exceptional.
Be your best.
— Omid G.
“The Godfather of Negotiation Planning”
Intel Corporation
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