![]() However, those making a highly precise first offer were less ambitious than those who were less precise-but still came out ahead. Loschelder and his colleagues found in a 2017 study that more ambitious first offers led to more favorable outcomes for the party who made the first offer. Leuphana University of Lüneberg professor David D. For example, a house with a list price of $255,500 is likely to attract higher bids than houses with list prices of $256,000 or $255,000. Negotiation researchers have found that precise numerical first offers are more effective than rounder offers. In addition, because ranges appear to convey flexibility and accommodation, they may offset the assertiveness conveyed by price anchoring. For example, a seller might ask $7,000–$7,500 rather than $7,000 for her car.īolstering-range offers appear to lead to better outcomes in single-issue negotiations. They find value in delivering a so-called bolstering range offer, one that includes the single-figure offer you might plan to make at one end and a more ambitious number at the other end. ![]() Mason find that expressing offers in a range can help you claim more value in financial negotiations. In a 2015 study in the Journal of Personality and Social Psychology, Columbia University professors Daniel R. Should you name a specific price-say, $7,000-or suggest a price range, such as “I could sell the car to you for about $6,500 to $7,500”? You want to make an opening offer that is aggressive but not offensive. You know that the fair market value of the car is about $5,000–$6,000. Suppose you are about to negotiate the price of your used car with a potential buyer. If you decide to engage in price anchoring, how aggressively should you bid? A smart guideline is to anchor at the end of the ZOPA that favors you, but not outside of the bargaining range. By contrast, when you are negotiating over an asset that you know a great deal about, you should take advantage of your superior knowledge and make an aggressive first offer. ![]() In the typical job negotiation, for example, the interviewer knows more about the possible salary range than the job candidate does. When the other party seems to know more than you do about the size of the ZOPA, you will have trouble anchoring effectively. The decision of whether to make the first offer should be based on two factors: your own knowledge of the ZOPA and your assessment of the other side’s knowledge of the ZOPA. This analysis will tell you how much you know about the zone of possible agreement, or ZOPA-the range of options that would be acceptable to both sides. Next, estimate your counterpart’s BATNA, target, and reservation point. To decide whether it’s a wise idea to make the first offer in a negotiation, you need to assess your best alternative to a negotiated agreement, or BATNA your target and your reservation point-your point of indifference between accepting a deal and pursuing your BATNA. Assess Both Parties’ Knowledge of the Bargaining Zone The following three guidelines can help you deal with the other party’s price anchoring and engage in effective price anchoring yourself. For example, if you enter a job interview hoping for a salary of $75,000, but the interviewer only offers you $50,000, you may find yourself making a counteroffer of $55,000-far less than the $80,000 you would have asked for if you had made the first offer. Research on the price anchoring effect has strong implications for price anchoring in negotiation. ![]() In research documenting this price anchoring effect, psychologists Daniel Kahneman and Amos Tversky found that even random numbers can have a dramatic impact on people’s subsequent judgments and decisions. The first offer typically serves as an anchor that strongly influences the discussion that follows. Opening offers have a strong effect on price negotiations. ![]()
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