5 ways to make your threat appear credibleMethod 1: Have an alternative you are willing to do
Nothing scares a seller like when you threaten to run a competitor. If you want to negotiate a lower cable rate, internet connection, or better deal on a car, tell the seller your other offer, convince them you really want to stay but are willing to switch (even if you are not), and see how often they cave in.
I'm sure most of you have been in this position and succeeded at some point so I won't belabor it. The truth is, if you have a true alternative, you don't need game theory to help you. I will continue with methods that give you the illusion of leverage even when you don't have it.
Method 2: Use a threat that is hard to disprove but would be riskier, if true, for your opponent
One summer I was a counselor of a month-long camp for high-school students at Stanford University. Being in charge of thirty high-school students is not easy because we counselors had few real punishments we could dispense.
For mild misbehavior, we would often threaten the unruly camper that we would call his parents. Most campers fell in line because they were scared. But in reality, this was a non-credible threat. A call to parents would not only anger the parents, who were spending good money for this camp, but it would raise questions to our boss, who might wonder if we were bad counselors.
There were of course some kids who still misbehaved repeatedly--perhaps they figured out our hollow threat. We devised a better solution for them: we threatened that we'd tell Stanford admissions about their poor character, which would ruin their chances of getting in. Now, I didn't know if Stanford kept such admission files, but neither did they, and it would have been really hard for them to find out. In that uncertainty, the threat was very effective: I've never seen students turn obedient so fast.
Method 3: Suggest you have alternatives even if you don't
One of my friends received a job offer during college. It was from his top company choice. The only problem was the offer didn't contain a signing bonus. My friend had heard the company did, in fact, give signing bonuses to some new employees.
My friend was in a bind. He did not want to negotiate the offer directly because he might tip his genuine interest, which would make the company unlikely to improve the offer. He was at a slight advantage because, through interviews and congratulations calls, he was sure the company had a large interest in him.
My friend had two weeks to decide on the offer. He contacted the company and indicated the offer was nice, but he needed more time to think about it. He asked for a small extension and indirectly suggested he was considering other offers.
The company soon offered him a signing bonus and called him to encourage he work for them. And he did.
I will offer caution with this method: there are companies that direct negotiation might work better since it is a more straight-forward method, and some companies are so powerful that they will not cave in. My friend suspected he was better off hiding his true interest and that his company would make give him the standard signing bonus.
Method 4: Use the Press (or a Lawyer)
Someone I know had a terrible experience with a cell phone company. The phone they sent him was defective, and when he sent the phone back to them, they denied responsibility and claimed there was water damage on the phone (which there wasn't).
The evidence, of course, was in the company possession, so it was hard for my friend to disprove. After days of failing to get a reasonable response, my friend decided to raise the stakes. He got in touch with a large newspaper and found a reporter willing to write about the story.
My friend contacted a high ranking executive at the cell phone company, told his story, and suggested that his newspaper contact would pick up the story if he didn't get a favorable resolution. He quickly received a written apol