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Reuters/Brendan McDermid
Look out.

Dishonesty pays off in negotiations if done in this particular way

By Max Nisen

There are lies of commission, where false information is passed. And there are lies of omission, where information is passively omitted. And then there’s a third, trickier type of deception called “paltering”: actively using factually true information to mislead someone.

Paltering may be a common negotiation tactic, researchers at Harvard’s Kennedy School suggested in a working paper first released in late 2014.

It can work extremely well, they found in a series of studies led by associate professor of public policy Todd Rogers. But paltering can also backfire, and people seem to dramatically underestimate how badly others will react when they’re found out.

The authors lead with this extremely famous example of paltering:

Jim Lehrer: “No improper relationship”—define what you mean by that.

President Bill Clinton: Well, I think you know what it means. It means that there is not a sexual relationship, an improper sexual relationship, or any other kind of improper relationship.

Jim Lehrer: You had no sexual relationship with this young woman?

President Bill Clinton: There is not a sexual relationship—that is accurate.

NewsHour with Jim Lehrer, January 21, 1998

“He knew what he was saying,” Rogers told Quartz. “He was truthfully saying that there is no relationship, but he knows the audience would hear it as ‘there has never been.’ He was saying something he knows was true that would actively lead the audience to a conclusion that is false.”

Paltering is interesting because it’s both more common and harder to catch than other types of deception, the authors write. Twenty-two percent of executives surveyed told the researchers that they palter in most negotiations. Nearly half said they do in some cases.

The authors also ran a series of simulated real estate negotiations. In the simulation, a seller offers a property to a buyer. They’re told the range of possible prices goes from $38 million to $60 million. Each side gets extra money depending on how high or low they drive the final price.

The buyer knows that zoning laws are set to change, making commercial development possible, and the property much more valuable. The seller doesn’t. Sellers were instructed to ask specifically: “Are you going to use the property for commercial development?”

Buyers were assigned one of two strategies. To palter by providing a factually correct answer that was misleading or evasive (For example: “As you know, we have only ever done residential development”) or to be honest and upfront about what they know.

Participants were much more likely to palter than lie by commission. And a large number of the participants who were explicitly told to be honest ended up paltering on their own, without having it suggested or described to them.

People who paltered earned an average of $1.6 million more in one version of the simulation, 15% above than those who were were honest. In a modified version that made standoffs more costly, palterers earned $2.4 million or 24% more.

People who use paltering see it as benign compared to lying, because they focus on the fact that they’re technically telling the truth, instead of on its misleading effects.

“It’s in their mind, somewhere between honesty and deception,” Rogers said.

Most palterers appear to assume that counterparts will react the same way. But when paltering is revealed, people turn out to really hate it. They see it as the ethical equivalent of lying outright. Negotiators in the study rated palterers as just as or more unethical than liars. And they were just as likely to say they wouldn’t deal with a palterer in the future, indicating a long term reputation cost.

This disconnect likely comes from the fact that the palterer is judging themselves ethical because they haven’t lied, whereas the partner sees an unfair result.

“I think the palterer evaluates themselves on the means, and the partner evaluates the palterer on the consequences,” Rogers said.

Anyone considering it has to weigh better short-term gain against potentially ruining the relationship for the long run.