Running head: POLARIZING EFFECT OF AROUSAL 1 The Polarizing Effect of Arousal on Negotiation

This research examines the impact of physiological arousal on negotiation outcomes. Conventional wisdom and extant prescriptive literature suggest that arousal should be minimized given its negative effect on negotiations, while prior research on misattribution of arousal suggests that arousal might polarize outcomes, either negatively or positively. In two experiments, we manipulated arousal and measured its effect on subjective and objective negotiation outcomes. Results support the polarization effect. When participants had negative prior attitudes toward negotiation, arousal had a detrimental effect on outcomes, whereas when participants had positive prior attitudes toward negotiation, arousal had a beneficial effect on outcomes, due to the construal of arousal as negative or positive affect respectively. Findings have important implications not only for negotiation, but also for research on misattribution of arousal, which previously has focused on the target of evaluation, in contrast to the current research, which focuses on the critical role of the perceiver.