A model of when to negotiate: Why women don’t ask

Research suggests that women are more likely than men to pass over opportunities to negotiate for higher compensation. Studies from the laboratory, surveys, and field suggest that men are at least four times more likely than women to negotiate for compensation (Babcock & Laschever, 2003; Small, Gelfand, Babcock, & Gettman, 2007). When they do negotiate, women tend to claim smaller percentage increases than men on their initial salary offers (Brett & Stroh, 1997; Gerhart & Rynes, 1991; Stevens, Bavetta, & Gist, 1993). Aghast by women’s apparent lack of negotiating ability as well as the implications of this “gender negotiation gap” for the gender wage gap, both policy makers and professors have proposed additional training for women to raise their negotiating aspirations and effectiveness.

In this chapter, we argue that this apparent perceived bargaining deficiency on women’s part is actually a rational response to the differences in incentives and expectations that men and women face in compensation negotiations—one that is obscured by focusing solely on the immediate material payoffs from negotiation … We propose a two-period model in which employees make decisions about whether to negotiate for higher compensation in period one. Our purpose in creating a mathematical model is to be very concrete about the different effects that negotiating may have on a person’s utility and then to investigate how optimal decisions are affected by the gendered behavioral norms and expectations.