Adapted from “Resolving the First-Offer Dilemma,” first published in the Negotiation newsletter.
Should you make the first offer? Few questions related to negotiation have yielded more attention and debate. The conventional wisdom among some: Don’t make the first offer, or risk “showing your cards” and perhaps unknowingly giving away some of the bargaining zone. Others provide experimental and real-world evidence that making a first offer allows you to “anchor” the negotiation favorably, particularly if you have a good sense of the bargaining range and (even better) your counterpart does not.
In a series of studies, researchers Ashleigh Shelby Rosette of Duke University, Shirli Kopelman of the University of Michigan, and JeAnna Abbott of the University of Houston provide new evidence that might reconcile these competing perspectives. They asked MBA students to negotiate a single-issue price deal and recorded who made the first offer, the amount of the offer, and the deal outcome.
Subjects then were asked questions about their emotional state, such as whether they felt anxious during talks and whether they were satisfied with the outcome. The negotiators who made first offers felt more anxiety than those who did not-and, as a result, were less satisfied with their outcomes. Yet, backing up prior studies, those who made first offers did better in economic terms than those who did not.
The implication? If you value only the economic outcome of your deal, make a first offer in order to anchor the negotiation in your favor. But if you value satisfaction with the negotiation process more than the outcome itself, you may want to avoid the stress and anxiety of making a first offer.
The authors also recommend finding “a personal antidote that would prevent feelings of anxiety from emerging altogether.” For example, “some negotiators may find it helpful to role-play making the first offer and repeat this behavior in a safe simulation setting until they feel comfortable enacting it in a real-world negotiation.”
Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.
Related Article: Anchors Away